East Texas gas plant improves efficiencies with operations analysis

• East Texas gas-plant personnel participated in every aspect of the analysis of plant procedures and practices. [33,038 bytes]

As of February 1998, the plant had reduced its processing (inside-the-fence) costs from a 1995-1996 baseline of $0.055/Mcf to less than $0.035/Mcf. As costs went down, the plant reached an historic 100% on-time delivery and 99.8% on-specification delivery to its customers of propane and ethane.

While the plant increased production quality and improved on-time delivery, it simultaneously increased the total volume of gas and liquids processed.

The plant's previous performance, however, had not been encouraging. Plant return on assets (ROA) had been below that of most other downstream assets, as benchmarked against other companies.

When UPR senior management compared UPR's upstream ROA, a prime measure of performance for UPR, with the East Texas plant's ROA, continued investment in a plant with such poor returns became increasingly difficult to justify. Continued ownership in the plant also remained questionable, but its value to any market seemed equally so.

Throughout the first half of 1996, UPR senior management in Fort Worth weighed various additional investment, intervention, and sale options, but the under-performance was felt to be so ingrained in the habits of engineering, operations, and maintenance supervisory and hourly workforces that many doubted substantial changes could be made.

Despite these concerns, performance changes were implemented without personnel lay-offs or terminations. Furthermore, the plant was expanded from 660 MMcfd to 780 MMcfd with no addition of personnel.

Business analysis

In fact, millions more in capital expenditures had been planned for plant expansion and upgrades. Throughout 1995 and 1996, however, the plant had not demonstrated the ability to make sustainable and predictable improvements in both cost and process efficiencies.

The East Texas plant is a complex of four plants, one of which dates from the 1940s and the most recent from 1994.

Key engineering design changes implemented to upgrade process technology include the addition of cryogenics technology and amine subsystems for improved NGL recoveries.

Nevertheless, in three of the four plants, product delivery (quality, timeliness, predictability, and NGL recoveries) remained disappointingly low.

Throughout 1995 and 1996, maintenance costs, plant breakdowns, turnarounds, and other disruptions continued to plague performance. Labor overtime and external contractor costs had exceeded budget.

In July 1996, UPR requested Rutherford Consulting to conduct an 8-week analysis of the potential for improvement at the plant. A team of consultants and clients conducted interviews, database reviews, financial analyses, and benchmark studies with Fort Worth senior management, East Texas plant management, and personnel.

The team also met with customers, investment partners, and community "stakeholders" to gain their perspectives on plant performance.

The resulting data demonstrated that several factors did not measure up to best-practice standards as observed elsewhere. Of all maintenance work, 85% or more was high or No. 1 priority work, compared with best industry practice of 5%.

Second-priority maintenance was also well below best practice of 15%, while third-order priority maintenance, for which best practice is 80%, was less than 5%.

As a result, total plant costs to process natural gas, including all inside-and-outside-the-fence costs, were more than $0.08/Mcf, much higher than desired by senior and plant management. Based on a review of the plant's performance on a scale of basic practices and procedures to world class standards, the plant scored "Reactive."

Histories of plant turnaround performance, although unavailable in detail, were reported to have exceeded commitments made to producers regarding the length of time required, had typically gone beyond best estimates made to investment partners regarding turnaround capital and expense costs, and post-turnaround start-ups typically lasted longer than anticipated.

While senior management was concerned about labor's commitment to progress and improvement, all measurements, interviews, and surveys demonstrated that union representation at the plant was far more of an asset to UPR than a liability.

In fact, as analysis data, facts, and customer interview data were shared, local union leadership became more vocal about the need to accept the data, move ahead with the needed improvements, and secure the future growth and employment potential of the plant.

Improvement project

They broke the gas-processing business unit's strategy into specific, measurable, and time-based action-oriented goals. Calling these "smart goals," they assigned accountability for the mutually understood goals to both Fort Worth personnel and senior plant management.

At the plant, specific performance goals were set for management, supervisory, and engineering personnel who were expected to achieve these over the following 6-24 months.

To support the goal, plant personnel designed a "measures hierarchy." This measurement tree illustrated how each key measure of work activity, such as No. 1 (highest priority) maintenance work orders, influenced such top level measures as ROA. It related improvements in volumes of gas processed to revenues and even linked maintenance inventory costs to ROA.

With this hierarchy of measures, any plant employee could easily determine how his or her goal-performance measures affected overall performance.

But simply assigning newly stated goals and measures would not complete the "who does what" picture for the plant. The plant manager led the entire plant through RACI: responsible, accountable, consult, inform.

In this technique, the roles of plant and Fort Worth personnel were reassigned and clarified to ensure the revised goals and measures would be executed in a coordinated, measured, and accountable fashion.

As goals and responsibilities were realigned, multiple teams of plant and corporate personnel formed to solve several key process and technical problems. The plant maintenance coach served on a cross-functional team consisting of maintenance, operations, electrical, instrumentation, and engineering personnel to design a more-effective approach to the breakdown, turnaround, and preventive maintenance challenges of the plant.

The team named itself the "Seeking Other Solutions" (SOS) team. It not only designed but also implemented a new maintenance process and system focused on reliability-centered maintenance practices.

To automate preventive, turnaround, and breakdown maintenance work order prioritization, planning, and scheduling, this new maintenance process included the full application of a software program known as MAXIMO.

The team reviewed assessments that most maintenance software packages available on the market would work well if rigorously implemented with a set of maintenance procedures and practices for a plant complex with such a wide variation in equipment age and technology.

Best practices

At that plant, East Texas plant representatives learned how plant teams had achieved significant cost reductions and increased processing capabilities through a combined maintenance-production-engineering implementation of maintenance practices, procedures, and information systems.

One of the most effective practices observed at the carbon dioxide plant, and eventually implemented within the East Texas facility, involved prioritizing of such equipment as pumps, compressors, valves, and holding tanks.

A No. 1 priority rating required immediate, and consequently more costly, maintenance attention, while lower priority ratings enabled the maintenance, production, and engineering functions to approach each equipment item with more thorough planning and, therefore, substantially reduced cost.

In addition to extensive revisions to the critical equipment lists, East Texas personnel incorporated a best-management practice. Rather than operating with independent and distinct functions, they implemented a process to operate with diversified teams consisting of operators, mechanics, electrical, and instrumentation technicians.

Team members plan and schedule their work at one of the four plants that made up the East Texas plant at the time. At another plant, meanwhile, smaller in complexity or size, one person might perform this task.

To reduce supplies and spares inventory costs, the team established practices and procedures to standardize equipment and a central warehouse where only "Priority No. 1" inventory was stocked.

A more formal set of procedures was implemented to control how required inventories, such as spare pumps, were ordered, shipped, received, stored, identified, and released to plant personnel.

All inventory items released must now be identified with a maintenance work order number so that costs per type of work order can be closely monitored and controlled.

Critical equipment

For example, most of the plants' critical equipment items had all been treated previously as "No. 1 Priority." The result was that any time a pump of nearly any kind, for instance, required maintenance, the more costly reactive maintenance practices were called for.

The critical-equipment review team evaluated whether sufficient spares, back-up systems, or redundancies, warranted an equipment item's removal from No. 1 priority ranking.

Operations and engineering personnel revised a completely new critical-equipment list. The list revisions included a comprehensive review and synchronization of redundant equipment lists, many of them using different numbering or part identification systems.

New priorities and synchronized identification codes were then assigned to all critical-equipment items. The list was distributed throughout the plant so that anyone from any function, when preparing a maintenance work request, could identify the equipment identification number and its associated priority code.

To reduce peak power-demand costs and still meet increasing customer expectations, the East Texas plant learned that the carbon dioxide plant had implemented procedures that enabled operators to shutdown certain plants during the peak voltage-demand hours each day.

During these daily 4-hr outages, carbon dioxide plant personnel could perform preventive maintenance and other work that would otherwise require unscheduled or scheduled shutdowns.

The East Texas plant team learned that extensive discussions took place with both customers and the local power company to assure all parties of the costs and benefits to be derived.

Although the East Texas plant team considered power-demand cost reduction as an opportunity, they chose to defer indefinitely changes in their agreements with the plant's power company. They proceeded instead with the changes they could make internally as the highest priority items with the most potential impact.

While the SOS team implemented the new process and system, one of the East Texas plant's senior staff engineers led another team. Composed of plant, contractor, and supply personnel, this team implemented a planning process for major plant maintenance and capital improvement turnarounds.

The team selected the largest and most challenging turnaround project in the history of the complex as a test case for this new process. The team used Microsoft's Project Management software to develop detailed planning, scheduling, and tracking charts and to identify critical paths and key dependencies.

The turnaround team added detail to the charts through a series of weekly meetings held over a 6-month planning and preparation period. When the actual turnaround took place, engineering, maintenance, operations, electrical, and instrumentation personnel and contractors used these wall charts, which took up most of the bare walls over an entire conference room, to coordinate and provide status updates on their progress.

The turnaround was executed on a 24-hr/day basis. Extraordinary equipment requirements, such as cranes and other expensive equipment contracted hourly, were carefully staged to increase utilization and reduce total contractor costs.

Overtime hours were kept to a minimum to provide work crews with more rest and ensure a safer work environment. Contractors and crews were tightly scheduled as to when they would perform well-defined tasks, rather than simply "being available just in case."

While the turnaround team had forecast that as many as 40% of UPR's producers' gas would be shut in at any one time during the turnaround, they had coordinated and planned the entire effort so well that shut-ins affected only 15% of producers' gas. In addition, what might otherwise have taken 2 weeks or more to accomplish was completed in fewer than 7 days.

Amine-cost control

The team selected a short-term, seven-step, problem-solving process to improve costs associated with amine use. Because of the long history of problems with the higher-than-anticipated use and costs of amine, the team had to deal with some very strong opinions about the best approaches to a better level of performance.

To evaluate all available options, therefore, the project team interviewed several outside chemical firms whose expertise in amine systems could assist the team's decisions. Within a few short meetings, the team selected one of these firms to provide the raw chemicals required and, more importantly, technical problem-solving expertise in amine systems management.

As these internal plant problem-solving teams were initiated, the plant manager began weekly and monthly communications sessions, during which all changes, key performance indicators, and new roles and responsibilities were announced and clarified.

In addition to these communications sessions, plant management staff redefined their roles to that of a "coaching team" focused on how to achieve the new goals.

To assist the new "coaches" with incorporating behaviors that were different than a typical "plant management staff," the consultants were asked to conduct seven discussion and training sessions.

These sessions reinforced plant personnel skills in effective communications, meeting management, conflict management, problem solving, team building, performance management, and coaching skills. The coaching team continues to meet daily to enhance plant communication and coordination toward their agreed goals.

Reinforcing changes

Fort Worth senior management traveled to Carthage for each review and, in addition to listening to presentations from various plant personnel, communicated corporate-wide developments and reinforced the value that would be realized for customers, producers, the community, and UPR's shareholders as the plant's aggressive goals were achieved.

Reviews included graphics and presentations focused on the key measures of performance related to high customer satisfaction and plant profitability as measured by throughput, quality, on-time delivery of product, turnaround performance, and key reliability-centered maintenance performance measures and systems.

System and process changes, as developed and recommended by the SOS, turnaround, and amine systems teams were discussed and clarified at each plant review.

Results

For second quarter 1998, the East Texas plant delivered its NGL products to customers 100% on time and 100% on spec.

In maintenance measures, the No. 1 work priorities were down from 85% to 17%. Routine work orders were running at more than 50% compared with a goal of 85%, and total maintenance and repair costs were down substantially from the baseline.

The Authors

Robert E. Dunn is vice-president, gathering and processing, for Union Pacific Fuels Inc., Ft. Worth. From 1995 to 1997, he was general manager, natural-gas processing. From 1982 to 1995, Dunn worked for Union Pacific Resources and its predecessor Champlin Petroleum in various financial positions with the most recent position being director of operations analysis and banking. From 1977 to 1982, he was with Occidental Petroleum Corp. and from 1975 to 1977, Brown & Root Inc., Houston. Dunn holds a BS in civil engineering from the University of Tennessee at Knoxville and an MBA from Harvard Business School.

William D. Christ is vice-president, consulting services, for Rutherford Consulting Inc., Dallas. From 1979 to 1993, Christ was vice-president for the manufacturing and product development practices of United Research Co., Morristown, N.J. He holds a BA in German and secondary education from Wartburg College, Waverly, Iowa, and the Goethe Institute, Passau, Germany; a Masters in Divinity; and a Masters in Social Change from Luther Theological Seminary, St. Paul, Minn.

Copyright 1999 Oil & Gas Journal. All Rights Reserved.