How Yield Improvement Became the Focus of 2021 for the Petrochemical and Refining industry

The wide-reaching impact of COVID-19 has dramatically changed the landscape for the Petrochemical and Refining (PCR) industry.

With demand dropping to previously unheard-of levels, refinery owners across the sector have been forced to make significant changes to how they operate. Priorities shifted fast, as it became clear that refineries would need to fundamentally alter their outputs to retain margin preservation. With return on capital increasingly hard to secure, it's no wonder that hurdle rates are getting higher to protect ROI.

But it’s not all doom and gloom. At the forefront of efforts to respond to our customers’ needs, Willie Paisley, Aggreko's Strategic Account Manager looks back at the changes of 2020, and ahead to the opportunities and needs of 2021. He reflects on how his team was able to help customers react quickly and to even take advantage of the situation.

When COVID-19 hit, demand dropped fast

Willie describes the moment it became clear that COVID-19 was going to have serious repercussions for the PCR industry. “Early in the pandemic, it was evident that it wouldn’t be business as usual for both refiners and their critical suppliers,” Willie tells us. “Cars weren’t driving; planes weren’t flying; finished products were piling up in storage.”

Willie’s team jumped in to help

Willie speaks proudly of how Aggreko was able to help our customers react flexibly to these suddenly changing needs. “Our approach has always been to support our customers’ key business initiatives,” Willie explains. “As theirs changed, so did ours.”

With the rapid pace of events, a swift response was essential. “We quickly connected with strategic refining customers, hosting executive-level calls with chief engineers. We talked through their concerns: clearly, they weren’t interested in making more of a product that they couldn’t sell!”

This led to a strategic shift for refining customers. “With refineries running below 80% of their rated throughput, we knew that we had to pivot to finding opportunities for shifting yields toward more high-value products. That gave us direction!”

2021: “It’s all about Yield Improvement”

Looking ahead, Willie sees impacts from the pandemic continuing to play out. He describes a continued – and lasting – trend towards higher CAPEX hurdle rates in an understandable effort to preserve cash, capital, and ROI. He tells us that the fundamental way customers spend their capital has now changed. “It wasn’t that they didn’t have high hurdle rates before, more that they changed priorities on how they spend their cash. This won’t revert to pre-2020 any time soon.”

This shift will also be exacerbated by the wider trend towards new energy sources. “The advancing energy transition is not going to stop,” he explains. “Demand for fossil fuel is going to continue to fall. Refiners will have to be very selective on where they invest capital.”

So it’s no surprise that the focus for 2021 has undergone such a seismic shift. “The phrase we kept hearing was, “Yield Improvement”. Their other concern was, “We have less CAPEX money for yield improvement projects.”

How can you improve yield without capital investment?

Willie’s team worked hard throughout the early stages of the pandemic to solve this problem for our customers. Firstly, he explains that he was able to help them to reduce their utility spend, for example across power, cooling, water and steam. “As the pandemic took shape, some of our projects were either canceled or taken off rent. In a few cases they were taken offline and placed in standby mode.”

This approach meant that customers could take advantage of working with a vendor rather than owning equipment outright. “The beauty of rental solutions is that the cost can be turned off and on as situations dictate, whereas capital projects are long-term commitments and not easily canceled or temporarily stopped.”

The second way Aggreko was able to help was in shifting portions of lower-value products to high-value products with better ROI. For example, by lowering tower pressures, or by improving product fractionation and upstream reaction conditions, such as Fluid Catalytic Cracking Unit (FCCU) reactor pressure.

Willie takes us through a specific instance: “Crude units often suffer from high cooling water temperatures, especially during the summer months. It’s not uncommon to find a Vacuum Distillation Unit (VDU) supplied with cooling water at around 95F. This leads to economic losses caused by higher flash zone pressures: Vacuum Gas Oil (catalytic cracker feed) is routed needlessly to the Coker, and product yields suffer. Aggreko’s process engineers quickly identified the vacuum tower overhead condensing limitations, and were able to offer four temporary condenser cooling system options to minimize VDU flash zone pressure, none of which required any Capital Expenditure (CAPEX). It was all about yield improvement.”

Final thoughts: what resources can you call on to make the most of what you’ve got in 2021?

Willie’s experiences during the pandemic tell us that customers in the PCR industry are facing a squeeze on resources in 2021: (1) Adjustments or reductions. Whether adjustments or reductions to your workforce have left you with fewer internal experts to a task, or (2) like many others, your refinery needs to increase yield while also reducing capital expenditures. In any case, you’re trying to do more with less.

Willie believes that 2021 presents plenty of opportunities to overcome challenges, especially by deploying temporary rental solutions. He explains that staff engineers tend to think of permanent CAPEX solutions which aren’t always suitable in today’s market. Instead, he suggests that Aggreko’s capabilities can be used to solve seasonal challenges in a more profitable way, by using rental services that can be expensed using operating or maintenance budgets.

However you plan to approach the year, choose to work with a vendor who understands the climate, the challenges, and the opportunities that you face.

Learn more about our solutions for the petrochemical and refining sector

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