March 19, 2018
Recapturing margin growth for a new golden age of refining
By: Taras Zyla
Disasters can strike at any time. They have the ability to disrupt both supply and demand in the downstream supply chain. One needs to look no further than last year’s Hurricane Harvey as a testament to this reality. The EIA estimates the hurricane took
out almost 20% of the US refining capacity, causing gasoline prices to surge 40 cents/gallon, or a 19% increase in some locations. This year‘s busy hurricane season is the latest example underscoring the urgency of taking action to protect critical
assets in the oil and gas industry.
The good news is that we are not powerless when it comes to creating systems ready to meet the challenges of the 21st century. Resilience takes many forms, among them, investment in digital technologies that are designed ensure refiners have optimal control
over fuel supply chains. Major weather events, which are happening at increasing frequency and severity, can shut down production and disrupt supply to high demand geographies. By leveraging digital technologies, refining companies can reduce refinery
downtimes and optimize supply strategies to limit the disruptions caused by these major weather events.
Here are three ways new digital capabilities can mitigate refining disruptions and maintain more reliable supply during a hurricane:
- Real-time feeds from reliable external sources and predictive models can help better prepare operators and managers in mitigating refinery outages. Hurricanes always come with some degree of uncertainty. When it comes down to decisions
on shutting down refinery systems or units, millions of dollars of production capacity can be on the line. Time is of the essence. With real-time feeds of information from connected sensors providing real time asset condition and other data feeds
such as weather models, advanced analytics can give operators improved operational insight to help them make decisions faster. However, according to Accenture’s 2018 Digital Refining Survey,
only 8% of refiners have widespread adoption of advanced analytics today.
- Digital tools can speed maintenance planning for damaged assets Refineries with remote connectivity enable maintenance and reliability leaders to assess damages from safer locations during or after an event without endangering personnel
within plant boundaries. Advanced analytics can help prioritize required repairs and improve material sourcing. Modern remote monitoring requires connected sensors for critical equipment in addition to cloud connectivity. Unfortunately, refiners have reported that only 8% have widespread adoption of cloud technology - a key digital capability that can enable remote operations.
- Digital investments can improve the transparency of supply options, improving agility and response times Depending on location, hurricanes can impact both the supply and demand of crude and products like gasoline. Today, technology
enables refiners to more rapidly model their supply chain logistics networks, so that product can be more easily tracked and sent to the optimal location. Advanced analytics, often running in the cloud, can digest data orders of magnitude faster than
the traditional tools - data such as: production outlooks, predictive demand forecasts, real time product location and inventory data, weather and production disruptions, and trading and sales optionality. The combination of digital enablers such
as supply chain digital representations (“digital twins”), smart sensors, data lakes, cloud technology, etc. make better and faster supply chain decisions possible today.
Severe weather and natural disasters are going to happen, but refining companies can lessen the impact of an event by applying digital technologies. Refiners inherently know that digital investments are important with 67% indicating that a lack of investments
in digital can negatively impact their competitiveness. However, at the same time 50% name the top barrier of adoption as the cost of deployment.
Hurricanes, like Florence are a reminder of just one use case where digital investments drive value for downstream companies – one of many reasons to invest.
Intelligent Refinery Survey 2018 Accenture, June 5,
Hurricane Harvey caused U.S. Gulf Coast refinery runs to drop, gasoline prices to rise,
EIA, September 11, 2017