Refinery revamp projects FAQ

Thriving in the new reality: Refinery revamp projects FAQ

Our experts discuss why successful refinery revamp projects begin with co-creating a clear, long-term strategy.

By Shell Catalysts & Technologies on Aug 24, 2020

For refinery operators, having a clear picture of how assets can deliver on a strategic plan is imperative to evaluate competing margin improvement projects. Some refiners’ future success is predicated on their ability to increase distillate yield, whereas others are more focused on increasing feed flexibility or reducing fuel oil production.

In this FAQ, our experts provide an overview of revamp options, the financial returns possible and how to get started with a refinery revamp or upgrade project. Most importantly, they discuss why working with experienced experts in technical and economic evaluations is critical to align development projects with an overarching vision.

  1. What is the development period for a unit revamp and how does this compare with building a grassroots unit?
  2. How do the economics of a refinery revamp project compare with those of a grassroots unit?
  3. We are extremely capital-constrained. Are there any refinery revamp projects you would recommend that require less investment?
  4. The refinery revamp project’s forecast economics could be torpedoed by unplanned downtime, so what steps can we take to ensure that our assets stay up and running?
  5. We have identified multiple potential refinery revamp projects. How can we determine which one(s) to pursue?
  6. What typically happens during a refinery revamp project?
  7. What equipment do you install during a refinery revamp?
  8. How do you ensure that a refinery revamp project is successful?

1. What is the development period for a unit revamp and how does this compare with building a grassroots unit?

Clearly, the time required depends on the scope of work. The standard delivery time for replacing all the internals in a hydroprocessing unit, such as a hydrocracker, with multiple reactors and beds is about ten months, although it may be less than six months when the scope is less complex. We have more than 500 reference projects, 80% of them in non-Shell units, many of which have achieved such a timeline.

When the refinery revamp project is more complex, for example, if additional reactor volume is being installed, then it would likely take 24–30 months. This is borne out by one customer, Hyundai Oilbank in South Korea, that implemented a project to revamp both its high-vacuum unit and its hydrocracker and to install a new Group II lubricant base oil plant – all within just 27 months.

In comparison, the construction of a grassroots unit will typically take 30–48 months from licensor selection through to unit start-up. In part, this difference is attributable to the higher investment costs of a grassroots unit; it often takes several years before an organisation has sufficient confidence in the decision to invest.

Learn more: Pair hydroprocessing reactor internals with expert-level service for profitable projects and revamps

2. How do the economics of a refinery revamp project compare with those of a grassroots unit?

Again, it depends on the scope. Replacing reactor internals can provide extraordinarily fast payback: some of our customers have achieved payback times of significantly less than 12 months.

For example, Saudi Aramco Shell Refinery Co. recently upgraded to Shell reactor internals and Shell Catalysts & Technologies’ catalysts in its hydrocracker. This required $5 million in capital investment but enhanced the refiner’s profitability by over $10 million a year.

S-Oil in South Korea achieved an even greater benefit – more than $20 million a year – after installing Shell reactor internals and catalysts in the hydrocracker at its Ulsan refinery.

Download the scenario: Thriving in the new reality with a reactor internals revamp

But, even more complex refinery revamp projects such as those that involve adding new reactor volume may only require 20–50% of the capital required to build a new unit (on a dollars-per-barrel capacity basis) and could achieve a payback period of about three years. Compare that with a grassroots unit, which will struggle to achieve payback in less than eight years in a mature market.

In terms of how much capital is required, replacing the reactor internals typically costs about $5 million; a unit revamp might come in at around $50–100 million, whereas installing a new conversion unit would likely be in the region of $400 million, depending on the scope and size.

Related article: Thriving in the new reality: Why production flexibility is key for competitive refineries

3. We are extremely capital-constrained. Are there any refinery revamp projects you would recommend that require less investment?

If you often have, for example, difficulty with staying within your operating budget, significant unplanned downtime or find that your staff are often tied up with firefighting, there may be opportunities for you to unlock margin improvements quickly and for little capital investment.

If this is the case, then initiatives such as maintenance and reliability studies, energy management projects and hydrocarbon management reviews may be more appropriate starting points than a revamp. At Shell Catalysts & Technologies, we have always advised customers not to overlook their existing assets.

Another response, which can be particularly beneficial, is to review your crude diet. Because crude feedstock is such a large component of a refinery’s costs, there are substantial benefits from replacing a small part of the crude slate with alternative, cheaper crudes.

Before changing the crude diet, it is essential that you take advice on key issues such as hardware constraints and crude sourcing, but this can be an effective way to cut costs for minor capital expenditure if the risks are mitigated.

Consider those short-term initiatives as the first step and use the returns to help fund a revamp project that could provide, for a relatively modest investment, even bigger gains.

Learn more about crude oil processing technologies

4. The refinery revamp project’s forecast economics could be torpedoed by unplanned downtime, so what steps can we take to ensure that our assets stay up and running?

Once a refinery has achieved normal operation, it is important to focus on maximising the utilisation of its assets.

If you have ever found that the planning and scheduling of routine maintenance get pushed back in order to address breakdowns, or that the daily workload prevents you from adopting a proactive approach to maintenance, there may be opportunities to improve your performance in this area.

These options could include, for example, introducing risk-based rather than time-based processes that focus on the most critical areas.

5. We have identified multiple potential refinery revamp projects. How can we determine which one(s) to pursue?

The upfront project selection process is critical because most refiners are capital constrained and often have only a limited number of people with sufficient skills and experience to deliver such projects.

"It is vital that an organisation has a clear strategy for how it plans to enhance competitiveness."

Screening options for various strategies requires detailed technical and economic evaluations. Capital cost estimates are made using an extensive projects database. Operating costs are estimated using operating experience and best-in-class benchmarks.

A scenario-based approach is applied so that the selected option is robust under a wide range of economic circumstances. This is then taken for development into a firm investment proposal: one that aligns with the client’s long-term vision and overarching strategic objectives.

If a business were to launch a capital project without such an in-depth evaluation of what each option involves, substantial value could be at risk.

Read the executive brief: Out of uncertainty comes opportunity: Thriving in the new reality

6. What typically happens during a revamp?

The first step is usually for the refiner to confirm its objectives and select an experienced technology provider.

The technology provider will then conduct a quality test run to determine the current unit capabilities and constraints. Often, they will also conduct a feasibility study to evaluate the options; this provides a quantitative comparison of scope, costs and the resultant increase in unit capacity.

Before deciding on the scope, it is worth taking extra time for a critical review of the trade-off between the refinery revamp projects scope, cost and potential benefits.

With the scope confirmed, the refiner should then build an experienced team that comprises key personnel from the refinery with members from the licensor and the front-end engineering design and the engineering, procurement and construction contractors.

It should be noted that the quality of the interaction between the various parties can be key to a successful project; effective communication protocols are essential.

The team should then work closely with the turnaround manager and prepare a detailed, integrated plan to ensure that the revamp is executed efficiently and effectively and that the correct resources are available during the turnaround to do the work.

Another important element is staff training. The technology provider will provide the manuals and training on how to operate the revamped unit, including the start-up, shutdown and emergency procedures.

Discover: Optimising refinery operations with collaboration and digitisation

7. What equipment do you install during a refinery revamp?

We will often install new technologies such as the following:

  • State-of-the-art reactor internals that can enable a greater catalyst volume to be loaded into the reactor
  • Latest-generation catalysts to help improve product yields and cycle lengths
  • High-capacity distillation trays to enable higher throughput cost-effectively
  • Additional rotating equipment, such as turbines, pumps and compressors, to support the increased capacity
  • Higher-capacity valves to help remove hydraulic constraints

At Shell Catalysts & Technologies, we do not replace existing equipment unless there is a strong economic case, so recycle gas compressors and recycle gas turbines, for example, are rarely replaced. In some cases, we add additional reactor volume or distillation facilities.

8. How do you ensure that a refinery revamp project is successful?

Many of the most successful revamps include the common factors:

Experienced technology providers

Revamping an existing hydrocracker or hydrotreater is substantially more complex than building a new one and is a highly specialised area that calls for advanced process engineering skills and wide-ranging operating experience.

Thorough evaluations of revamp options

There is likely to be a wide range of potential projects and it is important to consider them through a range of operational and strategic lenses.

High-level sponsorships

When senior management widely communicates that a project is a top priority, the whole workforce often aligns to this common goal.

Adopting successful practices from other sites

There are tremendous insights to be gained from seeking out best practices and key lessons from other refineries.

A high-quality team

The team that manages the revamp should be multidisciplinary and include representatives from operations. This is recommended for all capital projects but is even more important for a refinery revamp project.

Local knowledge

Global best practices and experience must be complemented by local knowledge; consider using local skilled or house contractors to implement the revamp.

There is another key factor that is specific to reactor internals projects: building a reactor mock-up. At Shell Catalysts & Technologies, we include a shop built in the factory as standard, but we often find that building a mock-up in the field as well can be extremely valuable. It enables us to work with the installation contractor and help it to prepare for safe and efficient hardware installation during the turnaround window.

Get started on your refinery revamp project by requesting a consultation

A previous version of this article was published on Sep 5, 2019.