Maximize Profitability with a Refinery-Wide Process Model

Because of the fluctuations in oil prices, the refineries are legitimately cautious, at least till the market rebalances. The changing market dynamics and stricter environment norms have only added to the complexities in the refinery operations. The article identifies specific process areas for profit improvement, as the refineries generally operate with low margins and suggests the benefits of integrating planning and process simulation tools to enhance operability.

With relentless globalization in place, hyper market volatility is the new normal. This creates increased velocity in the marketplace with fluctuating feedstock pricing, incessant commodities trading, rapid demand and supply shifts, as well as rampant currency movements. In this industry shakeup, we see new market entrants challenging traditional market incumbents. For example, the Middle East continues to stake new ground with newly built refineries while the strongest North American shale players defend their market share with great resilience.

However, refineries are fairly cautious about rising crude oil prices. Conoco Philips chief executive Ryan Lance is quoted in The Calgary Herald, “The volatility is here to stay. Market rebalancing will extend into 2017. The inventory levels are still quite high.” This industry perspective buys refineries more time before pricier feedstock kicks in eventually.

Focusing on the macro economy, Channel News Asia reported on global oil majors shedding refineries, as crude oil price takes a grounded recovery trajectory. Companies, such as Chevron and Royal Dutch Shell, are auctioning small refineries off their portfolio to trim lower margin assets. Fearing higher crude oil prices will squeeze refining margins, oil majors with refineries are rushing for the exit. This is because refineries can generally be sold at better prices versus the beleaguered exploration and production assets belonging to these companies.

Changing Market Dynamics Add to Complexity