Refinery Revamp FAQ

If you’re interested in learning more about how we at Shell Catalysts & Technologies go about revamps and the financial returns that are possible, read the Q & A below.

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 10 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 revamp 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.
 

2. How do the economics of a unit revamp 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 Criterion Catalysts & Technologies’ (Criterion) 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 Criterion catalysts in the hydrocracker at its Ulsan refinery. Find out more about S-Oil’s journey to hydrocracking high performance.

But, even more complex revamps 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. For more on this, view our Refinery revamps: compelling investment opportunities article.

3. We are extremely capital-constrained. Are there any 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. Find out more about Rapid Margin Improvement.

4. The 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 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. Find out more information about the options available with Rapid Margin Improvement.

5. We have identified multiple potential 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. For example, 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.

Only when the refiner has a clear picture of how its assets can deliver on its strategic plan, can it screen the competing margin improvement options and evaluate which one is most appropriate.

Screening those options 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. Find out more about making robust investments in a volatile market.
 

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 revamp scope and 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.

7. What equipment do you install during a revamp?

We will often install new technologies such as:

• 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 help improve throughput cost-effectively;
• additional rotating equipment, such as turbines, pumps and compressors, to support the increased capacity; and/or
• higher-capacity relief 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 or distillation capabilities.

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

Some factors that are common to many of the most successful revamps include:

• an experienced technology provider. 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.
• a thorough evaluation of the different 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 sponsorship. 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 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.