SPECIAL REPORT: Study measures effect of leading indicators on plant turnarounds

May 21, 2007
Many factors with varying degrees of controllability affect the outcomes of refinery and petrochemical plant turnarounds.

Many factors with varying degrees of controllability affect the outcomes of refinery and petrochemical plant turnarounds. Based on quantitative data collected from recent refinery turnarounds, this article examines and presents these factors, the “leading indicators” of turnaround performance, and quantifies their effect on turnaround outcomes.

This article introduces turnaround risk and readiness indices and their relationship to turnaround outcomes, and the concept of a standardized turnaround scope index. Finally, benchmarks of best turnaround practices are shared.

Turnaround data

Turnaround data indicate that turnaround safety, cost, schedule, and operability problems are not random. Rather, these problems are predictable months before a particular turnaround. Leading indicators such as turnaround characteristics and the level of definition and planning have a quantifiable effect on turnaround outcomes. There are varying degrees, however, to which these leading indicators can be controlled.

This article examines these controllable and uncontrollable factors and their effect on turnaround outcomes with a specific focus on turnaround cost predictability and competitiveness.

Although the turnaround organization does not have control over many turnaround characteristics such as qualified labor availability, material condition of the plant, equipment congestion, etc., the examination and understanding of these characteristics enable the quantification of their effect on turnaround outcomes. They therefore provide a gauge of the likelihood of meeting turnaround targets.

Just as importantly, effective risk management practices could lessen the effect of these characteristics on turnaround outcomes; therefore, lessen the negative impact that a protracted or costly turnaround may have on the manufacturing business.

Scope definition and planning practices are not only within the control of the turnaround organization, but are also leading indicators of turnaround success. The best turnaround systems effectively use a gated and phased approach to turnaround definition, planning, and execution. The best turnaround performers achieve integration and organizational alignment around their objectives, scope, plans, and execution strategies by effectively using their gated and phased turnaround work process and its alignment with their project development process.

Industry dataset

This study is based on an industry dataset of recent (past 4 years) turnarounds in the industry. The dataset contains more than 400 refining and chemical turnarounds. A subset (135 units) of the refining portion of the dataset contains detailed turnaround scope data.

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Fig. 1 provides a breakdown of the turnaround database.

Turnaround complexity

The data indicate that there are three characteristics that have the most influence on turnaround predictability:

  • The size of the turnaround measured in direct field labor hours.
  • The amount of capital work required.
  • The turnaround interval.

The first and the second factors measure the turnaround’s size and difficulty, and the third factor is perhaps a proxy for the degree to which the material condition of the unit is known, as well as the experience of the team with the unit.

We developed a “turnaround complexity” factor that combines these three factors together, and is a single indicator of turnaround predictability.

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Fig. 2 shows the significance of turnaround complexity (high, medium, and low).

Turnaround outcomes

In addition to the indications offered by turnaround complexity, two larger categories of leading indicators work together to increase turnaround predictability (Fig. 3):

  • Inherent plant and turnaround characteristics that pose significant challenges and difficulties that the turnaround team cannot control.
  • Level of scope definition, planning, preparation, and readiness to execute the turnaround, all of which are well within the control of the turnaround team.
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Uncontrollable leading indicators

There are more than 20 characteristics that influence turnaround safety, schedule, cost, and operability outcomes. These are just a few examples:

  • Turnaround complexity.
  • Availability of skilled labor.
  • Amount of piping work.
  • Amount of instrumentation and electric work.
  • Changes to decontamination method and procedures.
  • Equipment congestion.

The level of control that the turnaround organization has over these characteristics is very limited. For example, the outcomes of turnarounds with highly dense work areas are less desirable than those performed on less-congested units.

Turnaround organizations have no control over the plot plan or the equipment layout within the various operating units and, therefore, unit congestion is a given. Nevertheless, it has an impact on turnaround outcomes.

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Fig. 4 shows the cost outcomes of a subset of turnarounds in our database. It shows that those with high inherent risks overrun their cost estimate by an average of 33%, while those with medium and low risks overrun by an average of 19% and 9%, respectively.

Although turnaround complexity is a significant factor in the risk calculation, the reference here to “high,” “average,” and “low” risks are different than the complexity categorization. The risk calculation accounts for more than 20 inherent factors, and complexity only reflects the most dominant three. For brevity, Fig. 4 shows only the cost variability; however, these inherent risks have a similar gradual impact (different percentages) on schedule outcomes.

Controllable leading indicators

Although each turnaround is characterized by a set of inherent, or uncontrollable, factors that affect its outcome, the turnaround team regularly deals with a myriad of factors that are controllable; and actually have a more profound impact on turnaround predictability.

At a high level, these are: team alignment, scope definition and control, comprehensive planning, schedule integration, and level of preparedness; collectively called “readiness.”

Turnaround readiness

We developed a turnaround readiness pyramid tool to measure the level of readiness of a turnaround of any complexity at any point in time during the definition phase (i.e., the tool adjusts for three levels of turnaround complexities and for the time phases before the turnaround). This tool involves each turnaround team member independently evaluating the teams’ status in the 21 components of the turnaround preparation process.

Results are collectively input into statistical algorithms and the status of each of the 21 elements is displayed as red, yellow, or green. Additionally, it calculates the level of alignment around the status of each of the 21 elements.

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Fig. 5 shows turnaround readiness for an average industry turnaround of medium complexity in 2005. This shows the red, yellow and green status for each of the 21 elements. A similar tool details the team alignment for each of the 21 elements. The status and alignment tools are then used by the turnaround team to identify the more critical gaps, and ultimately prioritize resources.

Team alignment is often a more influential factor of turnaround outcomes than is status, especially for high-complexity turnarounds. The most significant misalignment is usually within the capital projects component.

For turnarounds with a high percentage of capital work, the engineering representatives consistently rate the status of this element as close to best practical (“engineering packages have been reviewed and are being produced in a timely fashion”); while the turnaround team members consistently rate it as having significant gaps from best practices (“engineering packages are behind schedule”). Misalignment indicates an opportunity for improved communications, and possibly more.

TRI

The turnaround readiness index (TRI) results when the status and alignment tools are combined. TRI is used to indicate the ultimate level of readiness of a turnaround at any point in time in the preparation phase.

TRI ranges between 1 (poorest) and 5 (strongest), with the optimal range between 3.8-4.0. The best turnarounds are not only well-planned, but the team is also well aligned. This is especially true for high-complexity turnarounds.

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Fig. 6 breaks down Fig. 4 data into three levels of readiness: poor, average, and strong (shown as red, yellow, and green, respectively). The chart shows that readiness improvement correlates not only to reduced variability, but also to lower average cost overruns. TRI is an extremely reliable indicator of cost predictability and, similarly, schedule variation and average performance.

‘Semicontrollable’ factor

Inherent factors and readiness provide a very good indication of turnaround outcomes. Although both of these factors affect turnaround competitiveness, there is one additional and much more significant factor behind turnaround competitiveness-the amount of work scope. A scope index for each type of unit is required to be able to compare the amount of work scope for turnarounds on like units.

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Fig. 7 shows the total picture of how inherent characteristics, turnaround readiness and the amount of scope can work together to deliver turnarounds that are predictable and competitive. When these fundamentals are complimented with the right benchmarks, competitive targets can be set and ultimately achieved.

Scope comparisons should be done on an “apples-to-apples” basis. In the past 2 years, we have extended our database to include detailed planned and actual scope data on six types of refinery units. Our scope database currently numbers 135 units; and there is always room for more data and benchmark participants.

Turnaround competitiveness

Not all turnaround disasters can be avoided. Through strong team integration, thorough scope definition, risk identification and mitigation, robust planning and scheduling practices, and diagnostics and monitoring tools, risks can be significantly minimized. As a result, the best turnaround teams plan and execute the right turnaround right by following their phased and gated turnaround work process.

This means starting with strategic decisions that lead to well-defined tactical planning, which, ultimately, ends up as a series of comprehensive integrated execution plans. Identifying, defining and freezing scope; completing planning early; managing risks; achieving team alignment and all along measuring readiness relative to world-class performers are the fundamental building blocks to achieve turnaround competitiveness and overall success.

The author

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Bobby Vichich ([email protected]) is the vice-president of Turnaround Professional Services at Asset Performance Networks, LLC, Houston, a project and turnaround solutions implementation firm based in Bethesda, Md. He joined AP Networks’ executive management team after 16 years in the petrochemical industry with ExxonMobil Corp. and Lyondell Equistar Chemical Co. Throughout his career, his focus has been work process design and measurement and optimization of turnarounds. Vichich has led a corporate benchmarking study chartered to define the next generation turnaround breakthrough performance metrics. He holds a BS in engineering from Virginia Tech.