Strategies for integrating turnarounds and capital projects
Capital project work as a percent of turnaround work has grown from just 2% before the Shale Renaissance building began in 2010 to more than 20% beginning in 2016, according to consultancy AP-Networks.
More than $1 billion worth of maintenance turnaround-related projects in the U.S. Chemical Processing Industry are scheduled to kick off before the end of first-quarter 2019. More than 75% of that amount comes from the U.S. Southwest region, where the Gulf Coast is witnessing a boom in chemical-related capital projects as well, according to Industrial Info.
Capital Projects and Turnarounds
Companies are willing to spend the money to expand but they don’t want to lose money from lost production in the process.
Integrating capital projects with turnarounds can minimize downtime, saving time and money.
Since an outage at a reﬁnery or a petrochemical plant typically runs for 45 days in execution, 60 days spec to spec, taking two in one year does not make economic sense.
However, lack of effective project-turnaround integration is cited as the top reason for turnaround failures, according to AP-Networks.
“The most challenging state of construction component, in my opinion, is the integration of capital projects with the turnaround realm,” said Joe Jackson, Process Quality Assurance at LyondellBasell.
Turnaround managers are often brought in to project planning too late for effective project-turnaround integration, experts say.
The larger the percent of capital work to be executed within the turnaround window the larger the risk for schedule and cost overrun, according to AP-Networks.
Overspend is one of the most common complaints of integrating turnarounds with capital projects, which stems from poor planning according to industry experts.
“The most common mistake is that the budgeting (both time and funding) process precedes the accurate development of the Turnaround’s required scope. Therefore, the term “over-spend” is usually inaccurate because the budget was set before the required work was known,” said Randy Pound, Global Director of Reliability & Maintenance for Olin Corporation.
Facility safety and reliability depend upon the intelligent execution of Turnarounds.
“Setting the budget before defining the required scope is a recipe for failure,” Pound said. “Nothing can compensate for this leadership failure. It is intellectually impossible to over-spend a poorly defined budget. In that situation, all you can do is spend more than you hoped. Excellent operations do not operate on hope.”
The best way to fairly apportion costs and responsibility between the project and turnarounds team is to combine the Maintenance and Capital leaders into one Turnaround team that is held accountable for the defined Turnaround Key Performance Indicators (KPIs), Pound said.
“This is a decision leadership can and must make and sustain if excellence is indeed the objective. This organization forces discussions and collaboration regarding budgets and Turnaround resource coordination,” Pound said.
Indeed, many experts interviewed echoed the ‘one team’ sentiment.
“There are always a few MUSTS to successfully integrate Projects into a Turnarounds,” said Eric LaPointe
Turnaround Coordinator for Chevron Phillips Chemical. “There should be One Scheduled Plan. Having to follow two schedules is impossible during a Turnaround. You get a “One Plan One Result”.
Jeff Spigener, Turnaround Manager at Ineos also says that one leader is important.
Capital Scope should be identified and frozen at least two years out if the Capital is more than 40 percent of the total Turnaround hours, Spigener said.
“There should be One Event Manager, and this should be Turnaround personnel, not the Capital project personnel. The reason this is critical is a Turnaround manager understands the time limits that are required by a Turnaround.”
Olin implemented the Project Execution Risk Assessment (PERA) methodology in 2018 and achieved excellent results from that, Pound said.
PERA compiles realistic, basic timing and risk-related information for every task that is going to be part of the Turnaround and then utilizes Monte Carlo Simulation techniques to provide the Turnaround team with a realistic view and prediction of the Turnaround’s probability of schedule adherence success.
It then provides the Turnaround team with ample guidance and opportunities to improve the schedule and the risk management activities of key, identified tasks to improve the Turnaround’s probability of success.
LyondellBasell is one of many chemical companies using the Primavera solution by Oracle – a project management tool to handle large-scale, highly sophisticated and multifaceted projects by breaking them down into thousands of separate activities – to address planning and to schedule all events to a level 5 detail.
LyondellBasell uses print outs from this solution for a strategy they utilize called the Three Shift Look Ahead. This strategy monitors accountability and helps the team to stay on top of the plan.
The charts, print outs from the Primavera Scheduling software, show the execution team the schedule for the next three shifts. Craft and managers can look at the Look Ahead and manage this shift’s work as well as see what is next.
“The most important requirement is a stronger and more-visible infusion of leadership expectations, support, energy, and discipline to process,” Pound said.
Capital spending is not expected to slow down according to a recent outlook published by the American Chemistry Council (ACC).
A new capital spending cycle began in 2010 as chemical manufacturers recovered from the financial crisis and as significant expansions of existing petrochemical capacity—due to new supplies of natural gas—emerged as the driving motivation. As a result, chemical industry capital spending in the U.S. surged 82% in the subsequent eight years, reaching $37.0 billion in 2018, according to the ACC.
During recent years, chemistry has accounted for nearly one-half of total construction spending by the manufacturing sector.
Despite the hindrance of slow global growth, economic uncertainty, and historical U.S. tax policies that discouraged business investment, these strong gains in chemical industry capital spending should continue.
The Tax Cut and Jobs Act (TCJA) enacted late 2017 will support capital spending. U.S. chemical industry capital. By 2023, U.S. capital spending by the chemical industry will reach $43 billion—nearly over two times the level of spending at the start of this prolonged cycle in 2010. spending increased by 7.9% in 2018 but will average 4.7% in 2019 and 3.4% in 2020 as many early projects reach completion.
Growth will moderate further in 2021 and 2022 but will resume in the period after that as recent project announcements approach key spending periods
Access to plentiful and affordable natural gas supplies is allowing the U.S. to capture an increasing share of global chemical industry investment.
Capital spending for bulk petrochemical and organic intermediates, along with spending for plastic resins, will dominate. Spending for process equipment, instrumentation, and structures present strong opportunities during this period, the ACC said.
By Heather Doyle