Two articles really caught my eye this month. One was from the UK (thanks to my business partner Patrick Alilovic for finding it,), which discussed risk management and aging facilities. The other was from Australia on how Shell is closing its 90-year old refinery in Sydney, reducing the number of operating oil refineries in Australia from 8 in 2003 to 6 after this closure. They both highlight the need to manage risk with older and aging facilities in a cost effective way to stay competitive, but from a completely different perspective.
The UK article is here. It is an excellent read, and discusses how predictive maintenance can be used to basically stop the aging process. My overly simplistic definition of predictive maintenance is … repair based on actual data from measurements. Since we do not want to shut down to do the measurements, we need to install instruments to make the measurements while operating. This requires a significant investment from management, because management must resist the temptation to cut the maintenance budget for one or two years to reduce overall operating costs (and thus falsely justify a bonus).
Predictive maintenance also requires a significant investment in staff to keep the instruments both accurate and precise enough for the data to be useful. When successful, the result is an aging facility that can be competitive in keeping its unplanned downtime minimised, and being able to operate until its planned downtime. Spare parts are minimised with predictive maintenance, as are warehouse space and warehouse resources – but only when done well. Predictive maintenance done on a budget often does not measure enough data, with many failures resulting that could have been detected with a better developed program.
The Shell refinery article is here. It is also an excellent read, but because of the source of the article (the source newspaper tends to be lean a bit to the right, politically speaking), there may be some political overtones when one reads between the lines. Here, Shell has made a decision to shut down a major portion of the asset, and convert the remaining portion into a refined product import facility. While about 200 people will lose their jobs, it does have many features of a “good touch decision”. Some of the good things to come out of the decision include:
+ minimal disruption to the customers of the refinery
+ minimal disruption to the wholesale and distribution system
+ targeting assets to retain and continue to use, including people assets
+ (and potentially most importantly) keeping up with a changing situation and market forces with a decision that will allow operations (and profit) to continue in several scenarios.
During the 1970s and 1980s, Australia was essentially crude oil neutral, importing and exporting about the same number of barrels, and refining almost 100% of the domestic refined products. The combination of declining domestic crude supply, increased competition for refined products from SE and South Asia (mega-refineries), the need to import crude to make refined products, and a very strong currency means that a good decision 10 years ago may not be a good decision now. Like I said it is always sad to see people lose their jobs by plant closure. Shell could have shut down the entire site and sold key assets to a third party to import refined product, but I think they made a better, tough decision and decided to stick it out as a reduced capacity.