[V6N2] – MCOR Strategy for the Downstream Refining Operations to Boost the Profitability

OMS Newsletter MCOR Strategy 2 min 1

The refining industry faces significant challenges in sustaining profitability due to the unpredictable fluctuations in the global crude oil market, which are influenced by supply and demand. A surge in crude oil prices results in increased fuel costs, reduced travel by consumers, and, subsequently, a negative impact on the profitability of refineries.

Refineries endeavour to enhance their operational efficiency to economize one additional cent. Conversely, a decline in crude oil prices induces a reorientation towards complacency, wherein streamlined operations are disregarded until the subsequent surge in crude oil prices.

By implementing an MCOR Strategy devised by OMS eLearning Academy, one can mitigate this tumultuous experience and safeguard the profitability of the refining process against the capriciousness of crude oil price fluctuations. This article will examine the “Divide and Conquer” tactic, an essential component of the MCOR Strategy.

Refining operations are divided into four areas by the MCOR Strategy:

  1. (M) Infrastructure Management
  2. (C) Manufacturing Control
  3. (O) Product Optimization
  4. (R) Hydrocarbon Reconciliation

An outline will be provided for each of these domains.

1. (M) Management of Infrastructure 

Within its 300+ storage tanks, a typical refinery houses liquid assets worth billions of dollars, originating from crude, intermediate, and final products. As product retention in tanks extends, the refinery incurs increasing financial losses. Through a comprehensive network of field equipment (e.g., pumps, valves, pipes, mixers, etc.) and a collection of control systems and software (e.g., Tank Information system, Oil movement, and storage system, blending control, etc.), the refinery oversees the movement of products. Constant maintenance and revision of these activities are required to prevent the loss of tangible benefits.

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MCOR – (M) Management of infrastructure

2. (C) Control of Manufacturing

Onsite operations at the refinery comprise process units are responsible for producing intermediate products. Despite their lack of marketability, these intermediate products are utilized during blending operations in the offsite operations area to produce the final products. Fuel products range from 80% to 85% of the refinery’s overall portfolio. The refinery stands to lose significant profits, estimated at $25 to $30 million, due to inefficient blending procedures, which might be carried out manually or using substandard methods. For instance, a giveaway of 0.10 RON could cost a 100KB/Day refinery one million dollars annually.

MCOR – (C) Control of Manufacturing

3. (O) Optimization of Products

The refinery’s products must be profitable and marketable. As stated previously, it is the most crucial aspect of refining; nevertheless, the refinery is more concerned with the profitability and efficiency of its product production. An instance of this is when fuel products necessitate strict adherence to specifications. However, refineries may sacrifice quality or fail to produce economically optimal recipes, resulting in millions of dollars in annual losses. Therefore, fuel product recipes must be optimized to reduce instances of quality loss.

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MCOR – (O) Optimization of Products

4. (R) Reconciliation of Hydrocarbons

In this regard, refineries experience substantial losses in profits. The term for this particular facet is hydrocarbon reconciliation or oil loss. It is accountable for balancing the receipts of crude oil and other products and converting barrels of crude oil into product shipments as shown in the following diagram. Hydrocarbon reconciliation is conducted To preserve this equilibrium on a preserved mass basis. The average amount of oil lost is between 0.3 and 0.5 percent. A minor variation in this oil loss in either direction would result in losses in the millions of dollars.

MCOR – (R) Reconciliation of Hydrocarbons

Consequently, what does everything mean?

How does each MCOR component impact a refinery’s overall financial viability?

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Strategic Roadmap for the Effective & Efficient Refinery Offsite Operations

Profitability is contingent upon two key factors:

  1. The effectiveness of infrastructure and operational efficiency.
  2. The efficiency of infrastructure management is enhanced by the reconciliation of hydrocarbons, while the effectiveness of infrastructure increases from hydrocarbon reconciliation to its management.

We can see the refinery profitability increase from infrastructure to reconciliation.

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