Aug-2023

The path to asset decarbonisation: How to determine the efficiency of your investments

The path to asset decarbonisation: The refining industry is critical to the world economy, providing essential energy and materials required for global development.

Keith Couch
Honeywell UOP

Article Summary

Refiners always have planned for success over a long-term time horizon, laying the foundation for sustained profitability and continued competitiveness. There are many factors affecting the success of a refining business – changing market conditions, available feedstocks, new technology, regulatory constraints, environmental policies and competition. As such, many refineries are under increasing pressure from shareholders, boards, institutional investors and their executive management to chart their path forward for sustained growth and prosperity.

Whether a refining business elects to remain in fuels production or expand into petrochemicals, it is critical to understand the profitability of the investment needed to achieve business objectives. Such investments are capital intensive and must be economically viable over their entire operational life. Determining the long-term viability of a project is complex and requires an understanding of the relationships between the factors that determine its success. A project built around principles that deliver a strong return on investment will ensure long lasting economic performance. However, the world is changing, and many refiners now are considering factors beyond financial performance when planning investment decisions.

In many cases, a project must be attractive to shareholders and investors in terms of profitability and social and environmental responsibility. Because UOP has assisted customers and their investors, to develop the most efficient and bankable projects possible, it has created a standard approach to assess total project performance, beyond profitability alone.

Refiners always have planned for success over a long-term time horizon, laying the foundation for sustained profitability and continued competitiveness. There are many factors affecting the success of a refining business, changing market conditions, available feedstocks, new technology, regulatory constraints, environmental policies and competition. As such, many refineries are under increasing pressure from shareholders, boards, institutional investors and their executive management to chart their path forward for sustained growth and prosperity.

Whether a refining business elects to remain in fuels production or expand into petrochemicals, it is critical to understand the profitability of the investment needed to achieve business objectives. Such investments are capital intensive and must be economically viable over their entire operational life. Determining the long-term viability of a project is complex and requires an understanding of the relationships between the factors that determine its success. A project built around principles that deliver a strong return on investment will ensure long lasting economic performance. However, the world is changing, and many refiners now are considering factors beyond financial performance when planning investment decisions.

In many cases, a project must be attractive to shareholders and investors in terms of profitability and social and environmental responsibility. Because UOP has assisted customers – and their investors – to develop the most efficient and bankable projects possible, it has created a standard approach to assess total project performance, beyond profitability alone.

UOP identified six critical performance factors for evaluating investment in a standalone refinery, or one integrated with petrochemicals. These six factors form the UOP Six Efficiencies (E6) framework. The six components are carbon, hydrogen, utilities, emissions, water treated as a scarce resource and capital. The E6 framework permits evaluation of these efficiencies and ranking of any trade-offs that may result from certain project objectives.

The E6 framework measures how well a proposed investment compares, relative to a best-in-class benchmark. Hence, it enables identification of opportunities that will lead to improved project performance, balancing financial outcomes with social and environmental implications. The E6 model differs from other industry benchmarking metrics. It benchmarks an investment against the latest technologies currently available.

time, existing technologies will advance, and new technologies will emerge. This continual innovation will result in improved benchmarks in each of the categories. Consequently, the benchmarks will be updated on an annual basis, which enables continuous classification of competitiveness against emerging technologies and in turn, will identify new improvement opportunities.

Essentially, the UOP E6 model is a planning tool that provides fundamental insight into an investment’s profitability, including its social and environmental impact, and timing. It enables better investment decisions to ensure a long-term leading competitive position.

Quantifying the six critical efficiencies
The scope of application for the UOP E6 model may include a downstream complex producing any level of fuels or petrochemicals and is valid for the full range of available crudes.

It also is applicable to new grassroots complexes and substantial revamps of existing complexes. This paper introduces a methodology for the refining and petrochemicals complex, but it also can be extended to the individual process technologies that make up the complex. The E6 methodology covers the complex and is not inclusive of the full life cycle analysis (LCA) of the net products.

A proposed configuration design for the complex should achieve optimum efficiency across all six factors. Optimum efficiency means that the configuration has achieved best-in-class performance compared with a benchmark. The benchmark for each category is based upon fully optimised configurations that include representations for the latest technologies available today.¹ The efficiency of each category for a configuration is measured by comparing against a benchmark configuration that is targeting similar objectives in terms of crude quality and product slate.

Designing a best-in-class complex today ensures long-term high performance and competitiveness. Therefore, it is critical to approach new projects with a flexible, future-forward mindset that enables creation of the right configuration and infrastructure for today and for the future.

For example, if water is expected to become a scarce resource, then invest in technology that minimises water consumption today because it will be more expensive to retrofit an open circulating cooling water system later. Similarly, include an efficient utility system in the complex design, also to prevent a costly upgrade in the future. Fundamentally, the E6 methodology is used to identify a strategy for improving the design and the performance of both new and existing complexes. Each of the six efficiencies will now be reviewed in more detail.