Oversupply and slowing global demand have significantly changed the pricing environment that engineering and construction, energy and chemical corporations operate in. Companies around the world are feeling the impact, and refineries in the downstream market in particular are being challenged to boost margins despite the fact that their final product is, in many cases, selling for half the price commanded a few years ago.

Optimization is no longer an option but rather a competitive necessity. In a fluctuating marketplace, feedstock and energy price volatility mean that for some regions refining, petrochemicals and chemicals industry competitiveness are being squeezed. Many companies can no longer rely on cost advantage alone, leaving little room for error. For industry leaders today, the imperative is to meet customer needs and be commercially profitable.

Before they can achieve this goal, however, firms must overcome complex challenges: optimizing complex operations, efficiently designing facilities to provide greater energy and capital cost savings, and maximizing manufacturing effectiveness through efficient supply chain management. Flexible technology is required to better manage plants and supply chains amid pricing, supply and demand turbulence. Innovative software for plant design and energy and chemicals production optimization can enable companies to conquer complexity and drive efficiency.

Understanding business challenges in a fluctuating marketplace

Taking advantage of changing industry dynamics while overcoming complexity is vital to achieve operational excellence and increased profits in today’s marketplace. Crude supply shifts worldwide are forcing firms to focus on reducing energy consumption, operating and capital costs. Additionally, typical ­operational challenges remain a priority, including making plants safer, achieving product quality and product yield, and improving refinery planning.

At the same time, the energy industry is also challenged by a significant skills shortage, as process manufacturing engineers retire and younger workers accrue the necessary expertise. As a result, companies are now challenged to retain and find the right skills with the next generation of engineers while ensuring that the collective knowledge and expertise of complex oil, gas and petrochemical manufacturing and supply chain operations is kept in the organization.

As volatility in the refining market continues, companies need to implement a combination of industry best practices and technology to evaluate new ways to increase efficiencies, improve margins, reduce costs and become more energy-efficient.

Best practices for conquering complexities

Oil refinery

Courtesy of AspenTech

Companies must squeeze as much value as possible from the manufacturing operation, especially when costs and risks are high. In order to achieve this, firms need to consider a number of complex factors and adopt best practices using integrated software, like those listed below, to achieve better cost results.

Commercial excellence. A number of companies today are focused on the development of mega-refineries and large integrated petrochemical plants that are world-class in size and complexity. However, in order to ensure these plants are a success, these organizations need to work hard to establish what to produce, how or when to ramp up production, where to sell products, how to distribute them, and the return on investment. ­By standardizing on optimization software, companies will improve margins, increase yields­, meet customer demand and gain
competitive advantage.

Operational excellence. In order to survive fast-changing market environments, companies need to be leaner, more efficient and able to adapt quickly to customer needs. To achieve operational excellence, today’s companies are implementing flexible and integrated software technology to bridge the gap between strategic planning and scheduling. By using integrated software to avoid silo practices, engineers are empowered to make better decisions to address feedstock planning, operational efficiency, energy optimization and safety analysis. Additionally, by optimizing processes with integrated software, companies can improve efficiency and bolster plant reliability, resulting in greater yield and lower costs.

CAPEX efficiency. Together with better analysis, the ability to easily evaluate capital investment projects faster and earlier in the design process helps engineers understand the economic implications of decisions. Crucially, project scalability, improved workflow, and the ability to achieve better predictability and accuracy during FEED reduces the total project life cycle. With better cost trade-offs in making incremental capital investment decisions, companies will become more profitable.

Compliance and sustainability. Efficient facility design is vital to achieve strong environmental, health and safety performance and to reduce operational risk as well as prevent injury to staff. This starts by ensuring facilities are designed, operated and maintained in a way that minimizes the potential for process safety incidents. Risk is also managed by quickly identifying hazards, assessing consequences, and implementing prevention and mitigation measures.

Skill and talent development. Today, many companies face a shortage of skilled and experienced chemical engineers. As the demand for specialist skills increases, many companies are turning to integrated software because it offers the tools for new and occasional users to become proficient faster, freeing up time for experienced users allows them to do more while bringing novice users up to speed faster.

A combination of these five best practices will enable refineries and others in the process manufacturing industry to respond effectively to the commercial and operational issues affecting their business. Using integrated automated software in particular delivers accurate real-time information and significantly helps operational decision-making be more efficient with fewer resources and time to complete tasks. Sustainability is enhanced through more efficient use of energy and less raw materials wastage, while quality is improved. Cutting-edge software streamlines workflow and manages orders more effectively, so they are on time and measurably meeting customer satisfaction requirements.

Companies standardizing on optimization software across the enterprise will minimize lead times, maximize asset utilization, speed up time-to-market, increase production visibility and strengthen competitiveness.

Implementing flexible technology to achieve success

With integrated software solutions, engineering and construction, oil, gas, and chemical companies can optimize process designs for energy use, capital and operating costs, and product yield through the use of activated energy, economics and equipment design during the modelling process. The most complete optimization technologies enable firms to accurately model and optimize the purchase, flow, storage and conversion of materials from feedstock supply to product shipment as well.

Making the plant design, manufacturing operations and supply chain work more efficiently creates a significant competitive advantage in a world of changed pricing dynamics. Additionally, the best solutions bring the power of optimization to more people in engineering, operations, planning and scheduling across the enterprise, allowing companies to save time and resources on training employees.

Navigating uncertainty is essential in volatile markets, and leaner, more efficient, adaptable companies understand that technology is a competitive differentiator, rather than just a cost of doing business. With an integrated, flexible software solution, oil, gas and chemical manufacturers can put into place best practices for optimizing their engineering, manufacturing and supply chain operations. As a result, they will increase capacity, reduce costs, achieve energy efficiency and boost profits.

In an industry characterized by boom and bust cycles, the constant change caused by unpredictable supply and demand patterns globally will drive companies to use innovative and flexible technology to significantly improve profit margins and remain competitive. With these solutions, organizations can minimize risk against unplanned events because they will have the tools to adjust day-to-day activities to find the most effective and efficient way to run the business. Additionally, avoiding silo practices with integrated software will help empower indigenous engineers to be better decision-makers for addressing planning, operational efficiency, energy optimization and safety analysis.

As refineries and chemical companies increasingly use data and advanced analytics to improve manufacturing performance, they will become more agile and able to quickly adapt to market opportunities. Factory floors are using sophisticated software simulation tools already to optimize yield, safety and quality. In the future, integrating process design and manufacturing execution will leverage data to improve process models as well as predictive capabilities so that maintenance costs are reduced and plant uptime is improved. Future industry leaders will embrace standardizing on a flexible technology solution to conquer complexity and drive efficiencies while applying innovation to create a unique competitive advantage.  

Dr. Suresh Sundaram is AspenTech’s senior vice president of product and market strategy. Since joining AspenTech in 1992, Sundaram has held a number of leadership positions in the areas of software development, product management, product marketing and sales operations. He holds a master’s and Ph.D. in chemical engineering from MIT and a bachelor’s in chemical engineering from IIT Bombay, and has completed the Executive Education program from the Harvard Business School.