SURVEY POINTS TO PRACTICES THAT REDUCE REFINERY MAINTENANCE SPENDING

July 4, 1994
Richard Ricketts Solomon Associates Inc. Dallas During the past decade, Solomon Associates Inc., Dallas, has conducted several comparative analyses of maintenance costs in the refining industry. These investigations have brought to light maintenance practices and reliability improvement activities that are responsible for the wide range of maintenance costs recorded by refineries. Some of the practices are of an organizational nature and thus are of interest to managers reviewing their
Richard Ricketts
Solomon Associates Inc.
Dallas

During the past decade, Solomon Associates Inc., Dallas, has conducted several comparative analyses of maintenance costs in the refining industry. These investigations have brought to light maintenance practices and reliability improvement activities that are responsible for the wide range of maintenance costs recorded by refineries.

Some of the practices are of an organizational nature and thus are of interest to managers reviewing their operations.

MAINTENANCE COSTS

Solomon Associates' analyses have revealed a wide range of maintenance costs for refineries, whereas the company had expected a narrow spread. The range was expected to be narrow, perhaps because, as engineers, Solomon Associates assumed that age, size, and location would have a strong relationship with performance.

The company also assumed that multirefinery organizations would record similar performance in each of their locations because of a common management approach. But this was not the case.

They learned instead that the range of performance is wide and that performance is independent of refinery age, capacity, processing complexity, and location. Facilities at all extremes of these attributes are included in both the high and lowcost categories.

Those in the lowest performance quartile posted twice the resource consumption of those in the highest quartile. Furthermore, there was almost no similarity between refineries within a single company.

It appears that each refinery's performance reflects the collective attitude and spirit of the refinery personnel more than any other single factor examined. The findings of recent studies will further illustrate these observations.

PROFITABILITY

Several graphs will show some of the traps of tacitly accepting the generalized performance data that are widely published by industry observers. Fig. 1 illustrates rising profitability from 1986 through 1988 because of market conditions.

As armies moved into the Arabian Gulf in 1990, profits climbed sharply. By 1992, margins had relaxed somewhat to prewar levels.

But if trend data for a constant group of 68 refineries is examined, the picture is quite different.

The difference in profitability between the highest and lowest performance quartiles was about 5% in 1986. But by 1992, the gap had widened to 12%.

This divergence is not merely an industry average phenomenon. It is clearly a difference in performance that is unrelated to the industry average performance.

COST TRENDS

Similar performance differences can be found by examining industry maintenance data. Fig. 2 shows a 6 year trend of maintenance costs' for the same trend group of 68 refineries.

The data represent total annual refinery maintenance cost per unit of refinery capacity and complexity, a term Solomon Associates calls equivalent distillation capacity (EDC). The industry average curve reveals an increase in expenditure of about 6%/year over the 6-year period.

This increase is not surprising, as it appears to be characteristic of inflationary pressures and increasing emphasis on control of refinery emissions. But when the data are viewed in terms of the performance spectrum, a very different relationship unfolds.

Those refineries represented by the lowest-cost quartile posted increases of less than 1%/year. On the other hand, the highest-cost quartile's spending doubled during the period.

The message in these data is that management practices in the industry diverge widely and represent some very different approaches to managing resource consumption in a competitive environment. In fact, those in the high-cost group may experience difficulty remaining viable.

EQUIPMENT AVAILABILITY

A concern closely related to maintenance cost is the impact of maintenance activities on the availability of processing facilities. Fig. 3 provides perspective on this issue.

The graph charts the performance of the 11 U.S. refineries with the greatest recorded increase in maintenance costs between 1986 and 1992. Note that accompanying the cost increase was a major decline in mechanical reliability.

The data for the nine U.S. refineries experiencing the greatest improvement in mechanical reliability are presented in Fig. 4. During the period, these refineries climbed dramatically from the average range into the best quartile, in terms of mechanical reliability.

This illustration indicates that, at least in refining, improved reliability is unrelated to maintenance spending.

FUNDS APPLICATION

About 35% of the average U.S. refinery's maintenance budget is directed toward the higher-profit processes, as shown in Fig. 5. These processes include fluid catalytic cracking, hydrocracking, and coking.

All other processes combined account for 35%. Utilities, marine facilities, and off sites consume the remainder of the budget (30%).

These statistics raise a question about the primary focal point of the maintenance manager's budget. Fig. 6 provides the answer.

About 54% of the average refiner's maintenance budget is earmarked for equipment repair and programmed replacement, while energy conservation, environment, safety, and other requirements consume 38% of the budget.

Reliability improvement programs account for a mere 8% of expenditures.

ANALYSIS

Examination of the high and low-cost segments of the industry reveals a wide variation in performance, and trend data show that the performance gap is widening. These differences are not related to age, size, or location, as it would be tempting to believe.

Furthermore, Solomon Associates has observed no differences in craft competence between the high and low-cost performers.

The reason for the broad spread is simply that the lowest-cost quartile refineries have less demand for repair maintenance and thus do less work in this area.

Table I is from a recent worldwide maintenance management study conducted by Solomon Associates. A quick analysis reveals that the lowest-cost quartile's craftsmen have four times more pieces of rotating equipment to maintain, per craftsman, than do the highest-cost quartile's craftsmen.

Those in the highest-cost quartile are kept busy repairing failures. These craftsmen have no opportunity to step back and examine the causes of the failures and formulate actions to make the repairs permanent, or to devise preventive and predictive remedies when the repairs can't be prevented.

APPROACHES

To put this issue into more general terms, there are two basic organizational approaches to maintenance:

  • Repair-focused organization. This organizational style embraces the philosophy that equipment will fail and the mission of the maintenance force is to respond quickly to equipment in distress.

    Failures are expected because they are the norm. Management and craftsmen stay occupied with repair activity and have no opportunity to examine failure causes.

    Staffing is designed to accommodate rapid repair, often including sizeable maintenance crews and nonday shifts. When failures do not fully occupy the work force, the organization focuses on lower-priority, frequently unnecessary, minor projects to "stay busy."

  • Reliability-focused organization. Maintenance repairs in this style are viewed differently. They are not expected to happen but viewed rather as exceptional and resulting from some flaw of maintenance policy and management focus.

The specter of a recurring failure and its incumbent cost is unacceptable.

The organization is sized to manage a condition-based monitoring system and assigns high priority to elimination of failures. Unnecessary work is not performed, regardless of the work load.

MANAGING RELIABILITY

Solomon Associates has attempted to make the case that achieving high mechanical reliability does not require simply increased maintenance spending and more overhauls and other repairs. In fact, the best performers require fewer expenditures for higher mechanical reliability.

What is required is the management approach reflected in the practices of superior performers: Purposefully managing reliability for results; making permanent repairs when needed; religiously pursuing the assessment of equipment condition; and continuously analyzing plant data.

LOW-COST PRACTICES

Several practices and policies have been observed to be associated with low-cost, high-reliability performance:

  • Purpose. A primary factor that distinguishes the better reliability and maintenance performers is that they recognize that plant reliability is not simply a result of repair effort. They also are convinced that eliminating failure is the primary mission of the organization.

    Consequently, they have designed their organizations specifically to achieve results. Ease of managing the maintenance work assignments is given lower importance.

  • Information. Every day, around the clock, refineries generate large quantities of information that describes the physical requirements of the equipment. Repair history, man-hour requirements for work tasks, costs, and equipment operating performance are familiar examples.

    The better performers recognize that their operating information is a company asset for which they have paid and which can be saved for reuse. They also realize that analysis of these data provides a wealth of information to aid decision making.

    Whether these companies use paper or electronic systems, they do not accept excuses for not recording data or not employing it in the planning of future work.

  • Technology. Evidence of reliability know-how in refineries today is regularly seen in the technical papers and question and answer sessions presented at technical and management conferences and symposiums.

    Engineers describe reliability-centered maintenance, sneak analysis, furnace-tube creep rate capsules, and a wide array of other recent technological advances to improve engineering reliability.

    But Solomon Associates' recent survey data reveal little active effort to put these tools to work to reap the benefits they have produced for the aircraft, airline, and nuclear power industries.

    Refineries cite limited manpower, time, and funds as barriers to progress in adapting new reliability technology. Yet these same refineries may pay for thousands of hours of permanent contract labor, for which work may be created to keep laborers occupied.

    Managers with special interests may review the new technologies but often without regard for how they can best be applied in other functional areas. Reliability-centered maintenance approaches, for example, define how resources for preventive maintenance can be assigned to preserve system function.

    But these same principles can be useful in optimizing process operator resources.

  • Review. The majority of refineries report carrying out some reliability improvement activities in areas of their organizations that have distinct engineering disciplines, such as control systems and hydrocarbon process engineering.

    But at the same time, they acknowledge that these specialty groups are acting in isolation from each other, without structured review of their aggregate effort by management. Priorities, expenditures, and results are not being evaluated from a viewpoint of what is best for the refinery as a whole.

    The better performers do not allow this to happen. They typically hold formal, scheduled reliability-program reviews, conducted either by their management teams, or by a reliabilitymanagement organizational element accountable for such activities.

  • Accountability. Refineries that have achieved control of their facilities performance and reliability have assigned individuals to be accountable for the success of the operating units. This accountability is assigned in writing, and typically may be included in 3 to 5-year operating plans.

    These plans include maintenance and reliability performance targets, objectives, budgets, reliability improvement spending for problem equipment, and job performance expectations for each position in the organization.

    Where accountability is absent, cost-effective, organized problem-solving and results are seldom observed.

ORGANIZATIONAL STYLE

Recent worldwide maintenance and reliability management analyses have provided insight into organizational issues that affect maintenance efficiency and reliability

  • Maintenance cost. Processing is the refinery's reason for being-the core of the business. Processing must have support from all other departments to carry out the plans formulated by company management.

    In this sense, it is not difficult to envision "process operations" as the custodian or "owner" of the processing machinery or equipment, in addition to the hydrocarbon streams they control and direct.

    Furthermore, because the operating assets are the sole source of revenue generation, it is similarly plausible to consider process operations responsible for the equipment's integrity, with maintenance and engineering playing subsidiary roles.

    This concept is gaining acceptance and has been seen to increase review of the need for specific maintenance work. It also has been observed to stimulate operating personnel into increased awareness of their roles as the "eves and ears" of the operating equipment.

  • Organizational structure. Solomon Associates has identified eight structural models that classify most existing organizations. These models are based on how the maintenance group is departmentalized and how resources consumption is prioritized (centrally or distributed to refinery subdivisions).

    The "management task" model is characteristic of the best performers. As opposed to organization by craft fines or maintenance task type (mechanical, civil, electrical), the management task model provides planning and systems, central shops and stores services, and maintenance engineering departments to support a workexecution group.

    The better performers are represented equally by areaassignment and central-assignment approaches to controlling the work force, but all employ centralized control of maintenance policy and work priority determination.

    No organization employing an operating team or "business unit" approach of distributed maintenance is among the group of better performers.

  • Operator utilization. Several refineries have tapped the resourcefulness of their process operators to contribute to reliability improvement and maintenance.

    Recognizing that the always-present operating forces can be the first line of defense against equipment failures, these refineries have provided training and motivation to increase the operators' awareness of equipment difficulties and to perform light maintenance tasks. This approach reduces both the consumption of maintenance man-hours and the administrative burden of processing the associated work orders.

    Solomon Associates' recent studies reveal that about one third of field process operators' shift time is unstructured and available for tasks other than attending to the process.

  • Reliability-oriented repairs. Successes have been experienced in improving reliability through corrective actions proposed on a regular basis as part of routine maintenance repair work. The mechanism depends on the solid technical knowledge of the craftsmen and maintenance supervisors, and a readily available maintenance engineering group for support, as required.

    The aim is to make most repairs permanent, if feasible. In one particularly successful refinery, this process has eliminated recurring failures to the extent that far less repair maintenance is required than in most refineries, and routine maintenance costs are among the lowest in the world.

  • Crew concept. Several refineries around the world have decided to staff their facilities with a core of workers capable of both operating and maintaining the equipment. This type of craftsman-operator typically has been developed by hiring people with technical or craft skills and training them to operate the processing units.

Proficiency in maintenance and operation is established and maintained by a system of rotation, and multicraft skill development is stressed.

These refineries are willing to invest significantly in the development of such persons. One such refiner has measured an average of more than two maintenance skill-levels per person, in addition to operator skills.

The efficiency and effectiveness afforded by their success is reflected in the fact that the refiner pays its crew 35% more than do other refineries in the region, yet its total maintenance outlay is 25% less than the next best refinery.

And there are several other rewards. The crews carry out all preventive maintenance and condition-monitoring schedules while on operating-shift assignment. And rather than two people being assigned to a maintenance job, those assigned to day-shift process operations are scheduled to provide short-term assistance.

In addition, the crew on the operating shift perform all preparations for equipment scheduled for maintenance, including purging and draining, disassembly, and electrical lockout and disconnection.

For those refineries using the dual-function crew concept, as much as 12% of total maintenance demand and reliability improvement are satisfied by the crew members while on operating assignment.

Solomon Associates recognizes that this approach cannot be universal. The attitudes of both the work force and management would have to be synchronized to the same standards of expectations, performance, and job enjoyment. But it may be possible for more refineries to approach these benefits if existing demarcations can be relaxed or modified.

Younger workers seem to be more willing to accept such efficiency improvements. They appear to be more inclined to learn more than one skill, but may be confused by the attitudes of their first-line supervisors, who matured in a singleskill era and may be unwittingly holding onto concepts that do not support the development of versatility.

Solomon Associates' work reveals that neither size, location, union activity, nor the magnitude of the refinery expense budget determine operating success.

Rather, it is managing for results, insisting on reliability, using business-like organizational approaches, and sharing concern between process operations and maintenance that characterize those refineries that set performance standards.

Copyright 1994 Oil & Gas Journal. All Rights Reserved.

Copyright 1994 Oil & Gas Journal. All Rights Reserved.