With demand for cleaner fuel products driving refinery upgrades in Africa, turnaround planning must be carefully managed to eliminate the risks of costly overruns and production losses, which can threaten the economic viability of the projects, says project management consultancy Turner & Townsend South Africa energy director Michelle Jackson and Cape region energy director Wanda Chunnett.
They note that, although Africa has the potential to produce 3.5 times more refined oil than it consumes, it remains a net importer of refined products, as most of its ageing refinery infrastructure operates at less than 70% capacity.
Jackson explains that some African refineries are more than 60 years old, with old technology and poor maintenance severely impacting on their efficiency, as well as their ability to meet demand and heed the requirement for cleaner, low sulphur products from the majority of international vehicle producers.
“These changes in environmental standards, together with improved global distribution infrastructure, means that it is often cheaper to import refined products than operate ageing refineries in Africa.”
She adds that the volatility of the oil price makes it difficult for refineries to commit any infrastructure spend to upgrade their facilities. Privately-owned refineries rely on their upstream income to remain profitable and, when the oil price fluctuates and drops, all spend is impacted on, including the downstream activities.
A lack of operational experience and little incentive for nationally-owned refineries to become competitive, as a result of imported refined products being heavily subsidised, present further challenges to the African oil refining sector. A lack of distribution and storage infrastructure also limits the ability of refineries to supply local and international markets.
However, alternative ownership and procurement models for refineries owned by national oil companies, such as complete privatisation or public–private partnerships, together with increasingly efficient technology, should increase the economic viability of upgrading oil refineries in some African countries in the near future, Jackson says.
“Deregulation of fuel pricing and decreasing or phasing out subsidies in countries, such as Egypt, should also improve the outlook for the sector.”
The Future of African Refineries
Chunnett highlights that, in the past, with refining standards and environmental requirements being legislatively driven, refineries have relied on government funding to begin major facility upgrades.
However, an emerging trend is a shift away from government-led intervention towards demand-driven upgrades as the market call for leaded and 93 octane unleaded petrol and “dirty” diesel declines, as a result of better fuel specifications and technological improvements in the automotive industry.
“African refineries are, thus, under pressure to become more environment-friendly in respect of their direct impact on the environment and the impact of the fuels they produce, if they want to compete with imported fuels.”
Although South Africa is leading the continent regarding refineries upgrades, having undertaken environmental upgrades in the past two decades to improve their impact on the health of surrounding communities, Chunnett stresses that the focus on the production of cleaner fuels to drive down harmful emissions must be enhanced.
“South African refineries are at a tipping point – the introduction of new, cleaner and more efficient technology will be critical to their ongoing viability as it becomes increasingly cheaper to import clean fuels. Routine maintenance and capital upgrades are complex and expensive; upgrades must, therefore, be carefully managed to achieve maximum returns.”
Well-Executed Turnarounds Are Key
While turnarounds are generally planned years in advance, Jackson estimates that almost 70% fail, as they are not completed on time or within budget.
“There is often conflict with operators who must meet output targets and reduce downtime and, although upgrades are carefully planned, much of what is required on a brownfield site is unknown. The size of the workface and the work time is limited, and the manufacture and transport of equipment has inherent schedule risks.”
As such, it is essential to prepare refining projects carefully with a thorough understanding of cost and schedule optimisation, risk analysis, procurement strategy, contract management, scope definition and control, as well as efficient project execution, she points out.
Jackson highlights that the gap between the strategic goals of capital expansion projects that have been planned at corporate level and the on-site realities of encroaching on operations to perform the actual turnaround often present conflicts that complicate the implementation of both the maintenance shutdown and major capital projects. While turnarounds are planned to limit production loss and shutdown time, capital projects tend to create increased interfaces, scope creep, access and logistics issues, as well as conflicting objectives that prolong the shutdown period and increase cost.
“Regardless of whether a planned shutdown is for a turnaround or tie-in of new capital projects, it is essential to complete the scope of work as quickly and efficiently as possible to maximise productivity. During unscheduled shutdowns, the pressure to get back to production is even higher. The cost of overruns on downtime goes much further than loss of production and, possibly, market share.”
To mitigate the risk of overruns, she stresses that companies must resolve any barriers that might arise, owing to tension between the capital project team and the turnaround team. “Consider involving the turnaround team in the front end planning and scope definition of any capital project to ensure that both teams are acting with a ‘one project’ attitude,” Jackson notes.
She advises that the accuracy of the estimate should be verified by an independent party to avoid any bias. The estimated cost and schedule should then be benchmarked against similar completed projects, with quantitative benchmarking done against external rates, industry norms and expected allowances, or against in-house project experience.
Next, companies must define the scope and project execution plan – and ensure that they stick to it – following best practices for freezing scope well in advance and avoiding the trap of deviating from the plan to include other elements while the plant is in shutdown.
Also, she stresses that companies must also ensure that they check the accuracy of their resource plans, considering the mix of skills, the amount of work fronts and total resources for the job. Adequate labour hours and materials for planned works must be ensured and any unforeseen costs identified and planned for.
“Lastly, companies must capture and store their project cost and schedule performance at the end of the turnaround. This can often be overlooked; however, it is essential for lessons learned to improve predictability for the next event,” concludes Jackson.