Oil and Gas Refinery Challenges: People, Product, and Placement

     
The revival of a strong economic foundation, increase in global demand, and boom of U.S. shale production shine a bright forecast for oil and gas refineries, numbering about 700 worldwide. About 20% of these operate in the U.S. and have emerged as one of the financially healthier players in the oil and gas ecosystem.

Nonetheless, even with the upside for this downstream player, refineries must continue to manage challenges like the availability of a skilled workforce, feedstock selection/product mix, and transportation logistics.

 Can prescriptive analytics address all three? If so, what are the use cases? Here are a few answers for each.

 People: Critical to Downstream Success

In general, attracting and retaining a viable workforce moves the talent component to the forefront. With today’s U.S. economy showing an unemployment rate of less than four percent, staffing requires careful attention.

 The shortage of talent is a concern, in addition to:

  • Scheduling shifts for efficiency
  • Avoiding workforce fatigue, often cited as a challenge for refineries
  • The ability to pivot with unanticipated situations like the 2015 oil refinery strike that involved one-fifth of the national capacity

The good news is that technologies leveraging prescriptive analytics can preempt poor allocation of valuable resources. It can identify the most efficient shifts at one location or across several facilities within a region like Valero, that has three refineries within a 100-mile radius of Houston, Texas.

Because this type of AI technology factors in multiple shifts with multiple production operations, work schedules can be optimized beyond what standard scheduling software provides.

In summary, better workforce management means better operating cost management.

Products: Mixing it up for Profits

As the U.S. gets closer to its status as a net exporter, refineries are benefitting with new market opportunities, including the demand for more blends. Before, refinery profits were more straightforward: action plans included purchasing low-cost crudes to produce standard products with high-market value.

However, new regulations and global market demands can alter business-as-usual operations. Take for example the International Maritime Organization (IMO)'s upcoming fuel standards. These require that transports switch from high sulfur fuel oil to low sulfur limits by 2020. This output change makes actionable insights critical to profitability in an industry segment with low operating margins.

Other use cases to assist with planning for product mix include the ability to ask questions like “What capital expenditures will yield the most value?” — significant for refineries operating with older infrastructures.

As product mixes and intake resources evolve for refineries, so does the need for more advanced analytics.

Placement: The Last Leg of the Margin Journey

Hurricane Harvey. The increased oil demand for Asian growth. Possible trade wars. Nature, extended travel time, and the geopolitical climate continue to add to the complexities of delivering refined products.

Prescriptive analytics provides the ability to provide optimal routing and schedules used for nominations and dispatch. The capacity to gain insights with a clear view of margin impact is unequivocal in maintaining company financial goals.

Refineries that want to maximize profits and margins will find advanced technology a partner in meeting the numerous challenges that they will face with the changing events ahead. 

 Energy Trading and Logistics

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