Turn Around – By Balancing Risks and Rewards, Refiners Can Profit from a Well-Executed Turnaround

Regularly scheduled turnarounds, which are undertaken to perform maintenance, inspections and upgrades that cannot be done while a refinery is running, are one of the most important (and expensive) activities of any refiner. Unlike unplanned outages, turnarounds and more significant work on key units within a refinery are necessary activities that are thoroughly planned in advance to maintain and improve asset performance. In today’s RBN blog, we look at what happens during a typical turnaround, the ways refiners seek to manage their risk, and the biggest potential payoffs that come with a well-executed project.

Successful turnarounds are essential to a refinery’s performance and profitability, but also enhance their ability to operate safely, meet environmental regulations, and prevent major failures or unplanned shutdowns. In addition, they create a window for debottlenecking and capital upgrades that can improve a refinery’s throughput, energy efficiency and competitiveness. But an expensive turnaround project, especially when combined with deteriorating regulatory and/or market conditions, may also set the stage for a permanent shutdown, as was the case with Valero’s plans to shutter its Benecia refinery in California by April (see Us and Them) and some other recent closures. In fact, with more shutdowns of refining capacity likely to come over the next couple of decades due to declining domestic demand (as detailed in the next edition of our biannual Future of Fuels report, to be published at the end of January), the impending need for a high-cost turnaround could very well be the deciding factor that sets the timing for future closures.

Managing the process requires a refiner to delicately balance a number of factors when deciding when to schedule a turnaround, how much work will be done, and how long it will last. How turnarounds are handled can vary considerably from refinery to refinery. Some refiners bring down nearly the entire plant at the same time (generally only considered by single-train facilities), while others bring down a few units at a time. It depends on which strategy works best for that particular plant. In recent years, refiners have been shifting toward partial plant turnarounds, where portions of the plant, rather than the whole thing, are brought down at different times. 

Most U.S. refineries have been around for decades, many with units that have been operating since the 1970s or longer. And while a refinery unit — such as a crude distillation unit (CDU), fluid catalytic cracker (FCC) or catalytic reformer — needs to undergo periodic maintenance to sustain desired performance levels, there are no hard-and-fast rules about what needs to be done when. (Our Future of Fuels report includes a Probable List and a Watch List of global refinery projects. The Probable List includes projects we expect to start up in the next five years, along with important details for each, including startup timing, crude capacity, type of crude expected to be processed, product yields by type, downstream unit capacities, project cost and other relevant attributes. The much larger Watch List identifies projects that have been proposed and, in some cases, are even in advanced development, but which we don’t expect to come online within our five-year forecast timeframe.)