David Nakamura
Refining/Petrochemical Editor
Maintenance activity, especially related to turnarounds, is on the rise in 2002 as downstream plant operators take advantage of weak market conditions to perform shutdowns. In an effort to maximize profits, refiners are more willing to keep units running longer to take advantage of high margins and are more willing to shut down units for maintenance when times get tough.
This demonstrates how important it is to maximize the effectiveness of each turnaround. Refiners are unsure how much market conditions may improve in the future, so they must be ready to extend run lengths beyond the normal operating plan.
The same reasoning applies to petrochemical plant operators. They are currently suffering through excess inventory and overcapacity. And like refiners, petrochemical producers are taking this opportunity to perform maintenance turnarounds.
The articles in this week’s special report, Process Facility Maintenance, give some good guidelines and principles for operators to maximize their maintenance turnaround efforts.
Refinery maintenance
US refining turnaround activity for maintenance has increased significantly compared with 2001. There is a chain of events that can be traced back to a few basic causes for the increase. One primary cause is the decreased demand for refined products due to the economic slowdown in late 2001.
Broad economic weakness and the aftermath of the Sept. 11, 2001, terrorist attacks on the US caused a demand decrease for jet fuel and gasoline. In addition, a mild winter caused a dip in heating oil prices. The price weakness in refined products, combined with stagnant crude oil prices, has led to low refining and marketing margins.
In fact, ExxonMobil Corp. recently reported its first quarter earnings, which fell 58% from the same period in 2001. The primary reason for the decrease was that the company lost $28 million in its worldwide refining and marketing business, in what it referred to as the worst conditions since the mid-1980s.
Conversely, during the first half of 2001, refiners enjoyed record profits due to high gasoline prices. They consequently deferred scheduled turnarounds to take advantage of these high margins.
In early 2002, the combination of low margins and maintenance projects postponed from 2001 gave refiners ample opportunity to undertake these projects. In fact, capacity utilization recently declined to 85%, the lowest level in over 2 years.
A study from Industrial Information Resources (IIR), Houston, predicted a 7% increase in major US refinery turnarounds in 2002.
IIR also noted that 37 FCC units were scheduled for maintenance in 2002, which represents about 36% of all FCC units in the US. Twelve of these shutdowns were scheduled for March alone, a period when margins were particularly bad.
Typically, FCC units shut down for maintenance every 3-5 years, so the large number of shutdowns scheduled in 2002 bears out the fact that refiners are stepping up maintenance activity.
Refiners also want to take the opportunity to install technologies and equipment that will allow them to comply with more-stringent environmental regulations, whether they are related to emissions or refined product specifications.
Chemical plant maintenance
Ethylene, the benchmark petrochemical, is currently experiencing the lowest prices since the early 1990s. A record amount of ethylene capacity came on line in 2000-01 (OGJ, Mar. 11, 2002, p. 66). This amount of overbuilding, coupled with a drop in demand due to economic weakness, resulted in a large amount of excess inventory.
Because so much refining is integrated with petrochemical operations in the US, many operators are taking the refinery downtime and the low-price environment as an opportunity to conduct maintenance on their chemical plants.
Another IIR survey identified 112 maintenance turnarounds in the US and Canada in second quarter 2002. This is a significant increase from the 48 turnaround projects that took place in the first quarter of 2001. Total spending for maintenance projects increased from $121 million in first quarter 2001 to $375 million in second quarter 2002, according to IIR.