Boosting the Petrochemical Industry

Petrochemical companies must improve their performance due to an uncertain and volatile market.

FREMONT, CA: The global petrochemical industry has experienced prolonged growth over the past few years. Sourcing feedstock from the Middle East and the United States significantly contributes to this growth. There is a steady rise in profits across the industry due to robust demand from consumer goods and packaging manufacturers and supply disruptions. As capacity increases and demand growth slows, the industry's value pool may shrink in the coming years.

There is evidence that large capacity additions and slowing demand growth may result in a shrinking value pool in the industry. Petrochemical companies must increase their performance to deal with the challenges of an uncertain and volatile market.

Operations: By minimizing capital expenditures, companies can maximize revenue. Operations improvement aims to increase yield, energy efficiency, throughput, and quality without compromising safety or reliability. Identifying performance gaps can translate into specific improvement opportunities by combining top-down benchmarking and bottom-up idea generation. Often, engineers and operators motivated to improve their plants' efficiency suggest initiatives that improve yield and throughput with minimal capital expenditure. Digital tools, data, and analytics are overarching themes in all industry transformations, and using data and analytics has also improved yield, quality, throughput, and reliability in petrochemical organizations.

Maintenance, reliability, and turnaround: Maintenance aims to maintain reliability at a low cost. Maintaining equipment efficiently reduces costs, improves reliability, and improves efficiency is one of the most important factors in cost-effective maintenance. Labor accounts for more than half of routine maintenance costs, and maintenance tasks could be more efficient and useful. For example, two people are working when only one is needed, workers spend time looking for parts, or technicians wait for machines to arrive. It is thus crucial to optimize maintenance costs by assessing and improving wrench time. Outsourcing or doing maintenance in-house, inefficiency has a price.

Procurement: Managing procurement sustainably is one of the key ways companies can capture value. Transactional in nature, procurement is not considered a bottom-line-impacting strategic function.

An integrated approach to procurement transformation must provide quick wins (such as expanding the supply base and optimizing demand) and long-term initiatives (such as enhancing capability and digitization). Tools such as clean sheets, should-cost models, incentives, and influencing mindsets can help organizations meet short- and long-term objectives.

Capital efficiency: Petrochemicals are capital-intensive, so capital expenditures are important. A disciplined approach is key to generating good capacity addition and investment returns. As the access to advantaged feedstocks has declined, disciplined capital spending has become increasingly important. The capital deployment process and funnel can be optimized using best practices for best-in-class capital productivity. During execution, a control tower is crucial for influencing mindsets, value engineering, and design optimization.