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Two bees making honey inside a hive

The key steps where a strategic licensor can add value to a refinery project.

Studies have shown that there are three critical points in the life cycle of a capital investment at which value can be won or lost. Substantial value can be captured during the early planning stages through good project definition and smart refinery configuration. Good project execution can then bolster this. Finally, optimising the completed facilities is critical to maximising the refinery margin.

It is quite common for a project to become fully operational four or five years after its initial definition. During that time, many things will have changed for the facility owner; not least among them could be a shift in the market. A strategic licensor is one that has the experience and knowhow to work with the owner to implement the necessary changes in the refinery’s operation to maximise the margin within the new environment.

To help ensure that projects capture value through all the natural stages of project progression, Shell Global Solutions has developed the Honeycomb Model (Figure 1). This helps to crystallise the project life-cycle model and highlights how a strategic licensor can support the project along its journey (Figure 2).

“The Honeycomb Model, broadly speaking, has three parts: develop the best plan, execute it correctly and continue to improve it,” says Süleyman Özmen, Vice President Refining and Chemical Licensing, Shell Global Solutions International BV. “And, in line with the project life-cycle model, it places greater importance on the beginning and the end of the process.”

Indeed because, the strategic licensor, a key activity in the first part of the Honeycomb Model is the combination of technology selection and smart configuration. This activity can make a huge difference to a project’s bankability and future economic performance, and there are numerous pivotal decisions to be made here. For instance, the specific technologies for each new process unit in the configuration need selecting.

This involves evaluating the features and capabilities of the various technologies on the market, but seasoned project executives will know that there are also several key risks here. For example, will the technologies match at the interfaces? Are all of the integration opportunities being captured? Are all the promised benefits likely to materialise? Is the technology proven enough? If not, does the project economic model align with the most likely improvement in the technology over time with utilisation and targeted performance?

Next, developing a configuration with a high level of process integration to achieve maximum energy and capital cost efficiency is an objective all projects start with. Getting the right balance in the overall configuration between efficiency and robust, reliable operation is critical and requires the real operational experience that a strategic licensor can bring to the table.

Secondary decisions then follow, for example, feedstock robustness. Should you build in the ability to process heavier or high-sulphur or high-total-acid-number crude oils? Should you install the hardware necessary to produce premium products such as low-sulphur marine fuels or winter diesel? Although they would increase the capital expenditure, these capabilities could have major impacts on future margins.

The Honeycomb Model, broadly speaking, has three parts: develop the best plan, execute it correctly and continue to improve it.

For some refiners, it is a good idea to define the gasoline-to-diesel ratio at this stage and to scrutinise opportunities for refinery-to-petrochemical-plant integration. Building a view of the future into these decisions is extremely useful. How much flexibility is required to adapt to future market changes?

According to Özmen, a strategic licensor that has operational experience should be able to help address risks such as these. “At Shell, we operate almost all of the technologies available, so we are well placed to understand each technology’s best fit within different refinery configurations. We also run complex refineries having sophisticated process integration schemes that deliver good energy performance along with reliability and robustness.”

Image showing how the Shell Global Solutions Honeycomb Model helps to crystallise the project life-cycle model.

Figure 1: The Shell Global Solutions Honeycomb Model helps to crystallise the project life-cycle model.