Over the last few years, weak demand and high inventories of refined products in many regions of the world have resulted in low refining margins and substantially reduced refining profits, resulting in lower capital spending plans in refineries. Many of the major oil companies are still investing heavily in exploration and production, but capital expenditures in their downstream businesses, such as refining and distribution, have declined substantially. Smaller capital budgets are being stretched to maintain existing downstream assets and meet environmental compliance requirements.
With low-margin products, the amount of capital investment required to make products has a significant role on an asset’s profitability. During economic downturns, such as what has occurred globally over the last few years and is not expected to substantially improve in the near future, spending capital effectively is critical to a company’s bottom line. Companies must focus on executing projects cost effectively to ensure that capital budgets can be stretched as far as possible and the expected rates of return on investments are achieved.
In some regions of the world, such as Latin America, the Middle East, Northern Alberta, Canada, and parts of Asia, very large investments are still being made in new refining assets and petrochemical complexes to allow these countries to meet local anticipated growth in demand for certain products. Using Best Practices to execute these very large projects will increase the likelihood that these projects will be cost effective and predictable.
IPA’s Refining and Petrochemicals Database includes more than 3,700 projects executed worldwide and represents more than $200 billion in capital investment. In 2009, 238 refining projects were added to the database, representing approximately $14 billion in capital investments. Projects of all types and sizes are represented in IPA’s Refining and Petrochemicals Database:
The database includes a large number of grassroots/colocated projects involving standard refining units from atmospheric and vacuum distillation to hydrogen compression and manufacturing. From these data, we have developed cost estimating relationships that serve as tools for benchmarking the cost and schedule of these projects. The refining units for which we have developed these tools are shown below: