Out of more than 340 oil refineries, a half-dozen that stand out from the crowd


There are six refineries in the world better than all the others.

That's the conclusion of Solomon Associates, which has an ongoing benchmarking of the world's refineries determined by a variety of tests on operational and financial performance. Those benchmarks include Solomon's Energy Intensity Index, a cost efficency index, measures of operating efficiency and the refinery's return on investment.

The six are ... well, Solomon's Michael Hileman didn't say in a speech to the Downstream Asia conference, part of Singapore International Energy Week. Afterward in an interview, he said he didn't even know the identify of all six, which he referred to as the "World's Best." But they don't get that top designation just by having a good year. It needs to be sustainable in the biennial study that Solomon undertakes.

The six come from a pool of 341 refineries that were studied and rated. Three are in North America, two are in Europe, and one is in Asia; that was the extent of identifying the supreme half-dozen. Solomon has been doing its surveys since 1994, and the data presented goes up through its 2008 studies. Research into 2010 performance is ongoing.

While it would be nice to know the identity of the six refineries, Hileman focused more on their shared characteristics. They tend to be big, with an average distillation capacity of 355,000 b/d. The average refinery of the 341 plants is 187,000 b/d.

Some of the deep conversion capacities they tend to share aren't that much different than the average refinery in the larger sample; for example, cat cracking as a percentage of total capacity is 22% for both the 341 and the top six. One significant difference: the top refineries average diesel hydrotreating capacity as 31% of distillation capacity, while the rest of the pool was 25%, allowing the top refineries better ability to capitalize on the world's tight distillate markets.

What does being the best mean in terms of money? Solomon says $2.04/b. That is the net cash margin that Hileman said can be calculated as the advantage for the "World's Best" refineries. Of that, he said $1.77 can be tied to better efficiency, like advantages in maintenance costs and conversion yields.

Hileman, in his presentation and interview afterward, emphasized two factors that he found among the best performers, areas that aren't readily identifiable in the list of efficiency factors.

The first is personnel. While the top six did not rank in the first quartile of top refineries for personnel management -- they were in the first quartile for all other categories -- they were in the second quartile, near the cutoff line. Hileman said many refineries, faced with a need to reduce costs, cut personnel as a first option, "but it takes people to make improvements."

In particular, he lamented the disappearance of process engineers, whom he said go to work every day "with the objective of how do I make more money with my process unit." Those positions often have been filled by people who become mentors to young engineers, Hileman said, but they are becoming a rarity. Too many process engineers, or those with potential to be ones, are deciding that a management track is the only way to higher pay at a refinery. But Hileman said there should be a track to a job that allows a process engineer to stay in that job, maximize the refinery's operations and still get paid well.

The second area Hileman emphasized is in the application of chemicals and catalysts. "The number one refineries see it as a profit opportunity, not as a cost," Hileman said. The best refineries look at using higher-quality (but more expensive) catalysts in their processes if it means better yields. The refineries that performed more poorly in Solomon's rankings approached the use of chemicals and catalysts more from a perspective of keeping costs down.

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