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LEVERAGE LESSONS LEARNED FROM MULTI-PLATFORM STRATEGIES TO SUCCESSFULLY DELIVER NEW REFINERY PROJECTS

Süleyman Özmen

VP Licensing, Shell Global Solutions International BV

April 2012Leverage lessons learned from Multi-Platform Strategies to successfully deliver your Mega Project


DISCLAIMER

Shell Global Solutions is a network of independent technology companies in the Shell Group.

In this document, the expressions “Shell” or “Shell Global Solutions” are sometimes used for convenience where reference is made to these companies in general, or where no useful purpose is served by identifying a particular company.

The information contained in this material is intended to be general in nature and must not be relied on as specific advice in connection with any decisions you may make. Shell and Shell Global Solutions are not liable for any action you may take as a result of you relying on such material or for any loss or damage suffered by you as a result of you taking this action. Furthermore, these materials do not in any way constitute an offer to provide specific services.

Some services may not be available in certain countries or political subdivisions thereof.

Copyright ©2012 Shell Global Solutions International BV. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical including by photocopy, recording or information storage and retrieval system, without permission in writing from Shell Global Solutions International BV.

The information contained in this presentation is provided for general information purposes only. No representations or warranties, express or implied, are made by Shell Global Solutions International B.V. or its affiliates concerning the applicability, suitability, accuracy or completeness of the information contained herein and neither Shell Global Solutions International B.V. nor its affiliates accept any responsibility whatsoever for the use of this information. Neither Shell Global Solutions International B.V. nor any of its affiliates shall be liable in any way for any liability, loss, cost or damage incurred as a result of the receipt or use of the information contained herein.



AGENDA

Balancing act in refining industry

Lessons learned from implementing improvements across the value chain – the A–Z concept

Update on the Shell Global Solutions Pentagon model

Steps in designing a successful project

Key takeaways



KEY CHALLENGES FACING REFINING INDUSTRY– BALANCING ACT: UPGRADE, SHUTDOWN OR BUILD Many ageing assets located far

from growing market

Crude owners desire to own the entire supply chain: crude to petrochemicals

Large and highly complex refineries integrated with Petrochemical site tends to be the new norm

Demand for clean transportations fuels is expected to continue growing

Regulations on emissions will continue to get more stringent

Regulations for cleaner fuels in all applications will increase (including marine fuels) April 2012Leverage lessons learned from Multi-Platform

Strategies to successfully deliver your Mega Project


IMPROVEMENTS ACROSS THE VALUE CHAINTHE A–Z CONCEPT – EVERY CENT COUNTS


Hydrocarbon

margin

Processing flexibility

Process re-configuration

GTL Productblending synergy

Upgrading HCU bottomsto base lube oils

Marine fuelsupgrading

Operating conditions

Refinery constraint modelling

Configuration studies

Crude selection/

crude assays

HSE

Organisational effectiveness

Feasibility studies

Staged investment:Revamp vs. new

units

Highperformance

Impact of crude qualityon refinery hardware

Energy management

Asset integrityand reliability

Shell Global Solutions Sulphur

Technology Platform

Integration with petrochemicals

Upgrading existing hardware (VGO HT to

MHC)

Maximise ULSD production

by upgrading LCO, DAO,

CGO and TCD

Opportunity crudes

Distillate dewaxing to ‘arctic winter’ diesel

Environmentalspecifications

Processing optionsCrude evaluationand procurement

Investment planningHardware selectionOperational excellence

The Pentagon model

remains as valid as ever – it provides a roadmap

for implementin

g these projects.


IMPROVEMENTS ACROSS THE VALUE CHAINTHE A–Z CONCEPT – EVERY CENT COUNTS!

Hydrocarbon

margin


Process re-configuration

GTL Productblending synergy

Upgrading HCU bottomsto base lube oils

Marine fuelsupgrading

Operating conditions

Refinery constraint modelling

Configuration studies

Crude selection/

crude assays

HSE

Organisational effectiveness

Feasibility studies

Staged investment:Revamp vs. new

units

Highperformance

Impact of crude qualityon refinery hardware

Energy management


Shell Global Solutions Sulphur

Technology Platform

Integration with petrochemicals

Upgrading existing hardware (VGO HT to

MHC)

Maximise ULSD production

by upgrading LCO, DAO,

CGO and TCD

Opportunity crudes

Distillate dewaxing to ‘arctic winter’ diesel

Environmentalspecifications

Processing optionsCrude evaluationand procurement

Investment planningHardware selectionOperational excellence

The Pentagon model

remains as valid as ever – it provides a roadmap

for implementin

g these projects.

Leverage lessons learned from Multi-Platform Strategies to successfully deliver your Mega Project

Copyright of Shell Global Solutions International B.V.

LESSONS LEARNED FROM THE PENTAGON MODEL

7

Operational Improvements

Am

ine

Hyg

iene

Energy Management

Hydrocarbon

Margin

Reliability

/

asset in

tegrityOperator Training

Short-Term = Just Surviving

PhasedInvestments

Claus Tail G

as

Treating

LT/LS SCOT

HV

U/S

DA

/DT

C

LCO Upgrading

HV

U/H

CU

/SD

A

Long-Term = Thrive

Health, safety and environmental issues are of great importance to Shell Global Solutions and thus central to all pentagon options

Short-Term Revamps

Liquid Treating

Hydrotreating

Catalysts & RI

New

Col

umn

Inte

rnal

s

Gas absorption (SOx, CO2, NOx)

Dew

axing HD

S

Short- to Medium-Term = Survive/Starting to Thrive


April 2012


OPERATIONAL IMPROVEMENTS – SURVIVAL

Shell Global Solutions believes that margin improvements of $0.1–1 a barrel can be unlocked at any refinery simply by sweating its assets, that is, by making them work harder but without capital investment

Projects from the A–Z scheme can be attributed to the pentagons

April 2012

Energy

management

Organisationaleffectiveness

People

ToolsProcessesC

rude selection A

sset

inte

gri

tyand r

elia

bili

ty

HSE

Pentagon I



OPERATIONSPROOF POINT: TÜPRAŞ

To make the company highly competitive in global markets Tüpraş management targeted top-quartile performance.

Through a three year business improvement programme, Shell Global Solutions and Tüpraş:

identified 220 opportunities for improvement

selected the 80 opportunities that would have the biggest economic impact.

As a result, Tüpraş’ operating cash flow increased by $244 million.

April 2012

Health, safety and

environment

Hydrocarbonmargin

Asset integrity

and reliability

Operating cost

Organisational

effectiveness

Work areas



SHORT- TO MEDIUM-TERM: INVESTMENT PLANNING CONSTRAINED CAPEX – STARTING TO THRIVE

The cash that is generated by the projects implemented in the Pentagon I programme can be invested in Pentagon II initiatives

Typically, these require $5–50 million of capital and have a return on investment of one to three years, depending on the scope of the project

Implemented examples:

Ukrtatnafta dewaxing

Omsk refinery hybrid – hydrotreater and dewaxing

April 2012

Capacity

Marginwith newfeed and

product slates

Productquality

(10-ppmdiesel)

Pentagon II

Revamps

Hydrodracker reconfiguration

Upgrad

ing existin

g

hard

ware (V

GO

H/T

to MH

C)

Dis

tilla

te H

Tupgra

din

g

Distillate dewaxing

for arctic winter

diesel



PHASED INVESTMENTS – THRIVE

Pentagon III focuses on the longer term for which several larger, more-capital-intensive projects may be worth closer inspection

In today’s competitive refining margin environment, investment is a key enabler for a thriving business

Implemented hydrocracker examples:

Grupo Lotos

CNOOC

MarathonApril 2012

Maxgasoline ormax diesel

Marginswhile

processingdifficult crudes

Cleanfuels

Maximise

ULS

D

Hyd

rocracking for

diffi

cult feed

stock Upgrading H/Cbottoms to base lube oils

Mari

ne fuels

upgra

din

g

Integration with

petrochemicals

Pentagon III



PROCESSING: HYDROCRACKING

Hydrocracking is seeing significant growth worldwide because refiners are using the technology to respond to the momentum in global dieselisation.

Many refiners are leveraging the flexibility that hydrocracking offers. For instance, they can:

swing between the gasoline mode and the distillate mode to take advantage of seasonal product demand shifts

process a wide range of feedstocks (including DAO, HCGO, extracts).



ENVIRONMENTAL LEGISLATION: THE SHELL SULPHUR TECHNOLOGY PLATFORM


Copyright of Shell Global Solutions International B.V.

SUCCESSFUL PROJECTS BEGIN WITH ROBUST FRONT-END DESIGN AND END WITH A DETAILED EXECUTION PLAN

14

5% costs 95% costs

Scouting Front-end development RealisationImplementation

543

2

1

A

B

C

D

Doing the right project Doing the project right

Scouting, Basis of Design

Project Specificatio

n

Detailed Engineering, Procurement, Constructions

Commissioning and Start-up


45 % 10 % 40 % 5 %

Origins of problems during CSU and (early) production

April 2012


THE PROJECT VALUE CHAIN THE A–Z CONCEPT – EVERY STEP COUNTS

Lesson learned


Punch List (according to design, check

functionality)

Optimum Capex/Opex with desired NPV

Design basis input from owner, PMC, EPC

Experienced EPC

Ensure Tightness/cleanlin

ess

Follow Procedures/Safety Rules

Equipment standardization

Vision, goals, strategy and KPI’s

HSE

Hiring and training of operators/Teams

Reliability

Maintenance strategy

High performance:- On schedule- On budget- Flawless start-up- High on stream efficiency- Meet return criteria- Well led competent teams

Contracting Philosophy

Selection of local contractor


Early procurement

Organization effectiveness/

Continuous training

Alignment of teams (project/Operations)

Input by key functions/ Define Roles

Hazop

Heat integration/ Value engineering /

Standardization

Detailed engineeringProject specificationsScouting and initial design

Normal operations/ Operational excellence

Commissioning and Flawless S/U

Constructions

Configuration

Disciplined/Experienced project

manager

Integrity Leadership: design, technical and

operational


April 2012


KEY TAKEAWAYS: LEARN FROM THE PAST

Focus on defining the right projects rather than fixing later

The A–Z concept shows that improvements to the basis of your project can be identified right across the value chain. Every step counts!

Learnings from the Pentagon model can provide a roadmap for implementing the right projects.

Synergy created by all best practices need to be well managed

April 2012

The project value chain The A–Z concept – every step counts

The Shell Global Solutions Pentagon Model

Short-Term

Revamps

Short- to Medium-Term = Survive/Starting to Thrive

Operational

Improvements

Short-Term = Just Surviving

PhasedInvestme

nts

Long-Term = Thrive

Health, safety and environmental issues are of great importance to Shell Global Solutions and thus central to all

pentagon options

The Pentagon model provides a roadmap for implementing

the previously-mentioned projects in a coherent,

planned order


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