Profitability CKM.pptx

7/29/2019 Profitability CKM.pptx

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In the end, all business operations can be

reduced to three words: people, product, and

profit.

Lido Anthony "Lee" Iacocca (Chairman, Chrysler Corporation)


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Broad Topics for Deliberation

Crude oil selection and GRM

Refinery configuration and GRM

Operational efficiency and GRM

Energy efficiency and GRM


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A Little Recap?

What is Gross Refinery Margin (GRM) and NeRefining Margin (NRM) ?

One way to represent the economics of a refinery is tcalculate its Gross Refinery Margin. GRM is the differencbetween crude oil price and total value of petroleumproducts produced by the refinery. The difference in dollar

per barrel between its product revenue (sum of barrels oeach product multiplied by the price of each product) anthe cost of raw materials (crude oil and other inputs).

The Net or Cash Margin is equal to the gross margin minuthe operating costs (excluding income taxes, depreciatio

and financial charges).Gross Refining Margin (GRM) = Value of petroleum products cost of crude


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A Little Recap?

What are the factors that influence Refinery GRM?

The factors that contribute towards GRMs are Crack Spread

Cost of sourcing crude oil

Manufacturing reliability and efficiency

Ability to produce quality transportation fuels Flexibility of crude oil receipt and product evacuation

infrastructure

Demand - Supply mismatch of the products


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A Little Recap?

What is a Crack Spread? Refiners profits are tied directly to the spread, or difference

between the price of crude oil and the prices of majorefined products gasoline and diesel.

This spread is referred to as a crack spread. It is namesuch because the refining process that cracks crude o

into its major refined products. The most common type of crack spread is the simple 1:

crack spread, which represents the refinery profit margibetween the refined products (gasoline) and crude oil.

The crack spread is quoted in dollars per barrel.


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A Little Recap?

What is Multiple-product crack spreads?

The most common multiple-product crack spread is the 3:2crack spread. A 3:2:1 crack spread reflects gasoline andiesel production revenues from refining industry, whicgenerally produces roughly 2 barrels of gasoline for eve

barrel of diesel. The 3:2:1 crack spread is calculated by subtracting the pric

of 3 barrels of oil from the price of 2 barrels of gasoline andbarrel of diesel.

3-2-1 Crack Spread ($/Bbl) = (2 x Gasoline Price +1 x Distillate Price -3 x Crude Oil Price)/3

Additional ratios used for multiple-product crack spreadinclude 5:3:2 and 2:1:1.


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Factors that Influence Refinery GRM

Crude Oil Cost Impact

FY 2011-12 data for all eight refineries (Balance Sheet)

Total value of Production = Rs 24885782 Lac (100%)

Total value of Crude Oil = Rs 22846480 Lac (91.81%)

Total value of other inputs = Rs 1251721 Lac (5.03%)

Gross Refinery Margin = Rs 787581 Lac (3.16%)


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Impact of Crude Cost

India will be among the countries that feel the pinch of risinoil prices, given its high dependence on imports.

For the financial year 2011-12, Indias oil import bill has rise40% to over USD 140 billion, and this accounts for nearlone-third of all imports.


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It is essential to reduce crude oil cost to improve margin anstay competitive.

The differential in crude oil price and processing costs arthe most influential factors that determine crude selection.

Normally Low Sulphur crude oils are costlier than HigSulphur crude oils

Tough / Dirty crudes are cheaper and can lead to bettemargin.

As per worldwide trends, at present, the refining industry processing opportunity crude oils, as benchmark crudprices are hovering around $100/bbl.

These crude oils are available at cheaper prices due tinferior qualities (High S, TAN, Residue).


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Processing tough/dirty crude is a challenge due toCost primarily associated with hydro-processing and residu

evacuation .Fuel specifications have become more stringent with strictenvironmental regulations.

Processing tough/dirty crude may give less value-added product, bstill product demand has to be met.

Opportunity crude oils not only influence the processincost due to hydrogen deficiencies, but they also producmore by-products and residues that must be upgraded oblended off with cutter stocks such as kerosene/diesel or alower-cost fuel oils (FOs).

Residue is the key focus for refinery profitability as withouresidue-upgrading facilities, such as Delayed Coker, SolvenDe-waxing, Visbreaker, etc., the residues have to bevacuated at the lowest cost.


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REDUCING INPUT COST: HS CRUDE PROCESSING

(Figs in

Facility Addition Year

Coker & HCU at Panipat 2006-07

OHCU at Haldia

2009-10

Coker at Gujarat 2010-11

Current HS Processing Capability is 57 % and will increase to

66% post PDRP.

66 67

74

81

0

20

40

60

80

100

2014-15 2016-17 2019-20 2021-22

Facility Addition Plan Year

Coker at Haldia 2015-16

Resid Upgradation at Mathura @ 11

2017-18

Further Upgrader at Panipat @ 18 2018-19

Further Upgrader at Gujarat @ 23 2020-21

New Refinery with Upgrader 2020-21

Equivalent to 92% HS on Imported Crude

Past Performance - Actual Future Plan

Actual HS Processing is in line with value addition using LPModel

d li


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Crude Quality vs Cost

CRUDE NAME BONNY LIGHT KUWAIT MANGALA MAYA

Sulphur 0.15 2.57 0.14 3.28

API 34.52 30.76 27.49 21.35

LPG+GAS 1.32 1.39 0.05 0.53

Naphtha C5-90 5.36 5.06 0.09 2.96

Naphtha 90-100 c 1.77 0.59 0.10 0.48

CRU Feed 100-110 C 1.79 1.38 0.11 1.01

Heavy Naphtha 110-140 5.22 5.46 0.40 3.91

ATF 140-240 18.63 14.74 4.43 11.63

KEROSENE 240-270 7.61 4.79 2.94 3.90

LGO 270-320 13.62 7.69 7.82 6.60

HGO 320-360 10.22 6.13 7.39 5.40

DISTILLATE 65.53 47.23 23.33 36.42

HVGO 360-540 25.75 24.74 42.30 23.00

Vac Slop (540-550) 0.87 1.22 1.87 1.28

VACCUM RESIDUE(550+) 7.80 26.81 32.55 39.28

Crude Price (May - July 12)

R fi fi i d GRM


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One solution is to design a grass-root refinery designespecifically for these types of tough/dirty crude oil.

For existing refineries, the real challenge is to equip threfinery through concrete time-bound actions to procesthese crudes profitably by improving configuration.

Configurations of refineries in India have changedramatically over the last three decades.

In 60s and 70s, Indian refineries were built based oprocessing of either indigenous crudes from the northeasregion or imported crude oils.

These refineries were of low capacity. The largest being o

about 3MTPA and were characterized by simplconfigurations consisting of AVU, CRU, DCU and treatinunits for LPG, Kerosene etc.

R fi fi ti d GRM


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SIMPLE REFINERY PROCESSING ASSAM CRUDE OIL

R fi fi ti d GRM


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The oil price shock of the 1970s necessitated re-examining of refineprocessing schemes .

It was realized that there was a need for additional secondary processinfacilities to upgrade heavy residues to value added distillates.

Accordingly, this period saw a significant emphasis on the installation oFCC Units in existing refineries as well as grass root refinery projects.

R fi fi ti d GRM


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FCC technology also gave advantages of producing morLPG as well as gasoline.

But unlike units installed in USA and Europe, these unitwere first of their type in the sense that they were designeto operate at low severity and to selectively produce mormiddle distillate.

In 80s, major increase in the demand of middle distillatewere foreseen. Hydro-cracking option offered a technicallacceptable route to maximize the production of midddistillates of very high quality and to offer the flexibility oupgrading existing refinery streams to the desired producquality by blending.

Hydro cracking units were installed in Gujarat RefineryMathura Refinery, Panipat Refinery, Mangalore and NRL.



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During last decade, product specifications are being closelreviewed / revised from environmental stipulations point o

view as well as optimum performance of the automotivindustry.

Products like diesel and gasoline are being specificalltargeted for quality improvement.

The main implications of the changes in the product qualit

are:a) Increasing use of hydro-conversion to upgrade heavy stocks int

value added product as well as improve the quality of distillates.

b) Installation of Gas sweetening, Sulphur Recovery (99% min) to meeenvironmental stipulations.

Fuel Quality (Auto Fuel Policy)


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Fuel Quality (Auto Fuel Policy)

Parameter BIS-2000 BS-II BS-III EU-IV Eq

Sulphur ppm max. 1000 500 150 50

Benzene Vol% max 5/3 3 1 1

Aromatics Vol% max. - - 42 35

Olefins Vol% max. - - 21(18#) 21(18#)

RON 88/93(#) 88/93(#) 91/95(#) 91/95(#)

(#) Premium grade

HOW MS QUALITY EVOLVED

Parameter BIS-2000 BS-II BS-III EU-IV Eq

Sulphur ppm max. 2500 500 350 50

Cetane No. * 48 48** 51** 51**

Cetane Index (CI)*

- 46** 46**

46**

Distillation 0C at 95% max. 370 370 360 360

Polycyclic Aromatics (Wt % max.) - - 11 11

* Lower by 3 nos. for Assam Crude ** Either Cetane No. or CI

HOW HSD QUALITY EVOLVED



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These requirements have lead to significant investments but withoua corresponding premium on the product prices.

To improve GRM, refineries have to look at ways and means timprove their product pattern to generate more value addeproducts, improve the energy efficiency so that total operating costcan be minimized.

What are these ways and means?

Refinery Product Slate Improvement and GRM


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Refinery Product Slate Improvement and GRM

Refinery product slate comprises of Gas, Distillate, HeavEnds, Own Fuel (+Loss) and Intermediate Stock Differenti

(ISD). Among these, Distillate is the only value added product an

must be maximized for better GRM.


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Distillation Improvement


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Distillation Improvement

One of the most important factor influencing distillatiocolumn efficiency is overhead condenser condition an

circulating water temperature. Proper upkeep of these twsystems helps distillate improvement significantly.

For plants that are in locations that experience shardifference between day-nighttemperature or summer-wintetemperature, judicious adjustment in column pressur

(according to a decrease in cooling water temperature) caresult in significant energy saving. This can be easilachieved through multivariable control (Reflux Temp as DV)

Damaged or worn column internals may result in increaseoperation costs due to efficiency reduction and pressurdrops rise. Replacing the trays with new ones or adding high performance packing can improve distillation efficiencand result in higher distillate yield.

Value Addition : Distillate Yield (%)


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Value Addition : Distillate Yield (%)

72.1 72.5

73.7

75.2 75.3 75.4

77.8

65

66676869707172737475767778

05-06 06-07 07-08 08-09 09-10 10-11 11-12

Facility Added Year

Coker & HCU at Panipat 2006-07

OHCU at Haldia 2009-10

Coker & VGO HDT at Gujarat 2010-11

Distillate yield for IOC Refineries is projected to increase to a

level of 79% post Paradip Refinery

78.7

79.7

80.7

82.6 82.7

76.0

77.0

78.0

79.0

80.0

81.0

82.0

83.0

84.0

2013-14 2015-16 2016-17 2017-18 2021-

%wt.

Year

Distillate Yield, %wt.

Past Performance - Actual Future Plan - Projection

Facility Addition Plan Year

FCC revamp at Mathura 2013-14

Coker at Haldia & Indmax at BGR 2015-16

Resid Upgradation at Mathura @ 11 MMTPA 2017-18

Further Upgrader at Panipat @ 18 MMTPA 2018-19

Further Upgrader at Gujarat @ 23 MMTPA 2020-21

New Refinery with Upgrader 2020-21

Value Addition Efforts


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B) Product Stream Sharing

Sharing of streams, feedstock & intermediaries stepped up to optimize capacity utilization

& enhanced profitability. :

Major Stream Sharing Activities Transfer of Reformate between refineries as per need to maximise MS make.

Naphtha transfer between Refineries as PX, PNCP feed and CRU feed for MS.

Propylene transfer from Mathura for Poly-Propylene at Panipat

CLO transfer from Guwahati for Needle Coke Production at BGR.

GRM Gain from Stream Sharing :Rs. 336 Crore ($0.17/bbl approx.) in 2011-12

Group-II/III LOBS Production from Hydrocracker Bottom at Haldia.

Propylene maximization at Mathura & Panipat.

Ethylene Maximization utilizing Coker & RFCC dry gas

C) Further Value Addition

A) Upgrade Low Value & Surplus Products

Naphtha Conversion to Petro-Chemicals

Kerosene Conversion to LAB

Petcoke to Hydrogen, Power & Chemicals

Process Heater Improvement


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Process Heater Improvement

Over 60% of all fuel used in the refinery is used in furnaceand boilers. The average thermal efficiency of furnaces i

estimated at about 75-90%.The efficiency of heaters can be improved by improving heatransfer characteristics, enhancing flame luminosity, installinrecuperators or air pre-heaters and improved controls.

Regular maintenance of burners, draft control and pas

balancing is essential to maintain safe and energy efficienoperation of a process heater. Excess air in furnace should blimited to 2-5% oxygen to ensure complete combustion.

Air preheating is an efficient way of improving the efficiencand increasing the capacity of a process heater.

Process Heaters Improvement


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Process Heaters Improvement

Heating and cooling are operations used in all unitthroughout the refinery. Within a single process multiplstreams are heated and cooled multiple times. Therefore this ia major improvement area. Optimal use and design of heaexchangers is a key area for margin improvement.

Fouling, a deposit build-up in units and piping that impedeheat transfer, requires the combustion of additional fue

Currently, various methods to reduce fouling focus on procescontrol, temperature control, regular maintenance and cleaninof the heat exchangers (either mechanically or chemically).

With the trend of more and more processing of heavy / Hcrude (Opportunity crude), the need of more intens

monitoring of fouling and timely rectification has becomessential.

Heat and Process Integration


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eat a d ocess teg at o

Heat Integration or Pinch Technology refers to the exploitatioof potential synergies that are inherent in any system thaconsists of multiple components working together.

In plants that have multiple heating and cooling demands, thuse of process integration techniques may significantlimprove efficiencies through appropriate exchange oenthalpy.Heat integration is the art of ensuring that the exchangin

streams are well suited and matched in terms of size, functioand capability.Pinch analysis takes a systematic approach to identifying ancorrecting the performance limiting constraint (or pinch) in anmanufacturing process. It was developed in the late 1970s iresponse to the energy crisis of the 1970s and the need treduce steam and fuel consumption by optimizing the desigof heat exchanger networks.

Heat and Process Integration


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g

Typically process integration studies focus on the integratioof stream flows within processes and between processesSometimes it is possible to improve the efficiency by retainin

the heat in intermediate process flows from one unit to anotheunit. This reduces the need for cooling or quenching in onunit and reheating in the other unit.Total Site Pinch Analysis has been applied by over 4refineries around the world to find optimum site-wide utilit

levels by integrating heating and cooling demands of variouprocesses.Major refineries that have applied total site pinch analysis areAmoco, Agip (Italy), BP, Chevron, Exxon (in the Netherlandand UK), and Shell (several European plants). Typical savingidentified in these site-wide analyses are around 10-30%.

Cost Efficiency : Energy Reduction


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y gy

(MBTU/BBL/NRGF)

IOCL Refineries have achieved savings of about 300,000 SRFT during last 5 years at an avg. of ~60,000 SRFT/yr ~ Rs. 160 Cr/Yr.

Future Plan is to bringdown MBN to 51 by 2017 through ENCONMeasures

Major ENCON projects implemented in refineries

Flare gas recovery system

Switch over from Naphtha to Natural Gas as feed in HGUs & as fuel in GTs/HRSGs.

Hydrogen Recovery from off-gases ex CRU,CCRU, DHDT & HCU/OHCU.

Helitower, Packinox type exchanger in CRU, CCRU, DHDT Stepless control in MUG compressors

50

60

70

80

90

IOC 85 77 77 73 71 67 64 62 59 57

INDUSTRY 89 84 81 77 74 71 69 69 66 63

2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12

Other Operational Improvement Areas


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p p

Flare gas recovery (or zero flaring) is a strategy evolving from the neeto improve environmental performance. Conventional flaring practic

has been to operate at some flow greater than the manufacturerminimum flow rate to avoid damage to the flare.

Reduction of flaring not only results in reduced air pollutant emissionbut also in increased energy efficiency replacing fuels, as well as lesnegative publicity around flaring.

Emissions can be further reduced by improved process controequipment and new flaring technology.

Reduction of flaring can be achieved by improved recovery systemincluding installing recovery compressors and collection and storagtanks.



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p p

Boiler Feed Water quality : This is important for reduced blow downreduced chemical use, maintenance, and waste disposal costs

Improved Process Control : Flue gas monitors and oxygen monitors arused to maintain optimum flame temperature, and to monitor COoxygen and smoke.

Reducing Excess Air: The more air is used to burn the fuel, the morheat is wasted in heating air. For gas and oil-fired boiler

approximately 15% excess air is adequate.



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Proper sizing : During steam line sizing, it is very important judiciousldecide the velocity and pressure drop. This reduces the risk of over

sizing a steam pipe, which is costly and also lead to higher heat losseOn the other hand a pipe too small may lead to erosion and increasepressure drop.

Maintain and Improve Insulation : Crucial factors in choosing insulatinmaterial include low thermal conductivity, dimensional stability unde

temperature change, resistance to water absorption, and resistance tcombustion. Also It is often found that after repairs, the insulation is noreplaced. Energy and money can be saved by a regular insulatioinspection and maintenance system.

Maintain and Improve Steam Traps : Modern thermostatic steam trapcan reduce energy use while improving reliability. A simple program ochecking steam traps to ensure that they operate properly can savsignificant amounts of energy.



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Hydrogen recovery is an important technology development area timprove refinery margin. It reduce the costs of hydrogen (one of th

most valuable streams in refinery) production. Hydrogen can be recovered indirectly by routing low-purity H2 stream

to the hydrogen plant. Hydrogen can also be recovered from off-gaseby routing it to the existing purifier of the hydrogen plant, or binstalling additional purifiers to treat the off-gases and vent-gases.

Suitable gas streams for hydrogen recovery are the off-gases from thhydrocracker, hydrotreater etc. The cost savings of recovered hydrogeare around 50% of the costs of hydrogen production.

Hydrogen can be recovered using various technologies, of which thmost common are PSA (pressure swing absorption), cryogeni

distillation, and membranes.



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Electric motors are used throughout the refinery, and represent ove80% of all electricity use in the refinery. The major applications ar

pumps (60% of all motor use), air compressors (15% of all motor usefans (9%), and other applications (16%).

Sizing of Motors : Motors and pumps that are sized inappropriatelresult in unnecessary energy losses. Where peak loads can be reducedmotor size can also be reduced.

Higher Efficiency Motors : High efficiency motors reduce energy lossethrough improved design, better materials, tighter tolerances, animproved manufacturing techniques.

Typically, high efficiency motors are economically justified whereplacing a motor, but are not economically feasible when replacing motor that is still working. We should plan accordingly. Replacing motor with a high efficiency motor is often a better choice tharewinding a motor.



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In the petroleum refining industry, about 59% of all electricity use imotors is for pumps, making pumps the single largest electricity user i

a refinery. Studies have shown that over 20% of the energy consumed by thes

systems could be saved through equipment or control system changes.

There are two main ways to increase pump system efficiency, asidfrom reducing use. These are reducing the friction in dynamic pum

systems or adjusting the system so that it draws closer to the besefficiency point (BEP) on the pump curve.

Correct sizing of pipes, surface coating or polishing and adjustablspeed drives may reduce the friction loss, increasing energy efficiency.

Correctly sizing the pump and choosing the most efficient pump for th

applicable system will push the system closer to the best efficiencpoint on the pump curve.



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Power Generation System

Compressors

FansBlowers

Lighting

Tank Farm / Product Despatch

Catalyst / Chemicals

Energy and Margin


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At overall IOC level, reduction of Fuel & Loss by0.1% means

Saving of 55,000 Ton standard refinery fuel (SRFT) per year

Benefit @ Rs 36,000 per Ton Rs 2,000,000,000 per year

Profit through better Monitoring & Control


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Modern control systems are designed for improvinproductivity, product quality, energy efficiency and thefficiency of a production line.

A well designed control systems and APC result in reducedowntime, reduced maintenance costs, reduced processintime, and increased resource and energy efficiency, as weas improved emissions control.

Many Automation Vendors including ABB Simcon, Aspe

Tech, Honeywell, Invensys, and Yokogawa supply advancecontrol systems for CDU, FCC HCU, DCU etc importanunits. Typical cost savings are $0.05 - $0.40/bbl of feed fothese units. Payback periods are often as low as 2-3 months

Major process units of IOC are having APC. Proper anuninterrupted running of APC leads to substantial GRMimprovement.


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GRM is the difference between crude oil price and

total value of petroleum products produced by the refinery.

Crude Oil cost has the biggest impact on refinery margin.Tough / Dirty crudes are cheaper and can lead to better margin.

In view of imbalance between crude and productcost, Refineries must look at waysandmeans to

Improve operational efficiency etc to improve GRM.

Reduction of0.1% of F&L means benefit of Rs 200 Crore / yearfor IOC refineries.

Refinery margin is EVERYBODYSBUSINESS.


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Margin Improvement thru APC


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Advanced Process Control (APC)

APC Benefits :

o 2-5 cents/ barrel for Crude Units

o 10-40 cents/barrel for secondary units like FCC, HCU and Coker

APC penetration

About 60-80% in Large scale industry leaders (Refinery, Petrochemical, Fertilizer)

47% of Potential units of Indian Oil are having Advanced Process Control.

APC benefit for IOC refineries : At Present : 8 10 cents/ bbl

After 70% penetration : 12 13 cents/ bbl

Blending Automation

Under various stages of implementation Significant benefits envisaged by reducing Quality Give-away



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Configuration / Complexity of a refinery depends upon: -

Nature/source of crude oils to be processed

Demand pattern in the markets to be covered Current / future product quality

Production of feed stocks for downstream units

Own Fuel Requirement

Environmental stipulations


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GRM is the difference between crude oil price and total valuof petroleum products produced by the refinery.

Crude Oil cost has the biggest impact on refinery margin.

Tough / Dirty crudes are cheaper and can lead to bettemargin.

In view of imbalance between crude and product cosrefineries have to look at ways and means to improvoperation, energy efficiency etc to improve GRM.

Reduction of 0.1% of F&L means benefit of Rs 20 Crore/yeafor IOC refineries. We are paid for not only running refinery but runnin

refinery WELL. We must not run our refineries COMFORTABLY but run them

PROFITABLY. Refinery margin is EVERYBODYSBUSINESS.

Documents

Profitability CKM.pptx