Anniversary

Solomons Worldwide Energy Industry Benchmarking

IAPG CONFERENCE 2006 Mendoza, Argentina

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Benchmarking Topics
Introduction Solomons Key Metrics Performance and Gap Analysis Cat. Cracking Performance Analysis Use of Benchmarks

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What We Do
Provide comparative performance analysis for the global energy industry
Fuels/lubes refining Petrochemicals Pipelines and Terminals Electric Power generation

Provide consulting services worldwide to facilitate performance improvement

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Knowing Where You Stand Competitively Is Imperative!

A valid, external comparison is the best way to gauge how well you are doing and to guide your staff to meet the challenge

World-Class Performance

Implement Practices and Processes Develop Implementation Action Plan Build/Adjust Vision

Current situation: Operating results Operating expense Yield Practices/performance Staffing

Comparative Performance Analysis

Biennial Feedback Loop

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NSA Participation and Trend Groups

USA Population 88 CAN 13 LTA 39 Total 140

Trend Group

76

11

33

120

Trend Group participation in each of last three studies

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Benchmarking Topics
Introduction Solomons Key Metrics

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Refineries Seeking Answers To Two Key Questions To Strengthen Positioning

Competitiveness Looking outside the fence
How competitive is my refinery in the marketplace?

Efficiency Looking inside the fence

How well is my refinery operating the facilities that it has today?

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How Competitive Is A Refinery In The Marketplace?

Strategic perspective economic viability Comparison of total cost and resources required to manufacture petroleum products
Without regard for number or size of process units or

other structural aspects contributing to higher costs As a result, competitive positioning may be limited by structural or configuration constraints Customers unwilling to cover differences in cost per barrel of product by refineries supplying the market
Customers at the pump dont care if a refinery has higher costs they only want the lowest price
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How Well Is A Refinery Operating The Facilities That It Has Today?

Operational perspective focus on efficiency Comparison of total costs and resources
Taking into account actual configuration aspects

number and size of individual process units and other structural aspects

Focus is on the effectiveness of cost control and resource management typically within a refinery managers control
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Competitive Metrics Overview

Key Metrics (Same As Previous) EDC is the normalization factor for competitive metrics Refinery EDC (UEDC) based metrics
Cash Operating Cost, US Cents/UEDC

Non-Energy Cost, US $/EDC

Maintenance Index, US $/EDC Personnel Index, Work Hours/100 EDC Personnel Cost Index, US $/EDC Capital Investment Index, US $/EDC

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Efficiency Metrics Overview

Key Metrics Energy Efficiency (no change in methodology)
Energy Intensity Index EII

Non-Energy Efficiencies (new)

Maintenance Cost Efficiency Index MEI

Personnel Efficiency Index PEI

Non-Energy Cost Efficiency Index NEI

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2004 Competitive vs Efficiency Metrics

Maintenance
US EDC Group
1 2 3 4 5 6
18.6 21.0 38.4

Competitive Metric US $/EDC

23.8 43.7 48 86.3 76 88.9

Efficiency Metric MEI

138.0 184.7 155.1

20.3
16.7 20.1

35.6
37.9 32.9

87.6
77.7 94.5

157.5
158.9 149.9

26.6 US Study Average Using New EDC Factors

118.1 US Study Average

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Benchmarking Topics
Introduction Solomons Key Metrics Performance and Gap Analysis

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Impact on 2004 Company Results

Maintenance US Quartiles

Competitive Metric, US $/EDC

15.3 49.3

Efficiency Metric, MEI

66.3 184.7

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Two-Dimensional Analysis
Example Maintenance Cost
US Average

60

Competitive Metric, US $/EDC

50 40

Refinery

30
Competitive Gap

US Average

20 10 60 80

Target Peer Group

Efficiency Gap

100

120

140

160

180

200

Efficiency Metric, % of Standard

US Participants
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Gap Analysis

Refinery Vs Peers Maintenance Cost

Refinery vs Peers US $M Key Gap Components Efficiency Size/Complexity* Total Competitive Gap

(15) (8) (23)

* Size/Complexity = Competitive Gap Efficiency Gap

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Closing The Gap

US Average

Efficiency Vs Size/Complexity Gap Maint. Cost

60

Competitive Metric, US $/EDC

50 40 30
Size/Complexity Gap

Closing 100% of Efficiency Gap

Refinery US Average

Competitive Gap

20 10 60 80

Target Peer Group

Efficiency Gap

100

120

140

160

180

200

Efficiency Metric, % of Standard

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Impact on 2004 Company Results

Maintenance US Quartiles

Competitive Metric, US $/EDC

15.3 49.3

Efficiency Metric, MEI

66.3 184.7

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Closing The Gap

US Average

Efficiency Vs Size/Complexity Gap Maint. Cost

60

Competitive Metric, US $/EDC

50 40 30 20 10 60 80 100

Closing 100% of Competitive Gap Via Efficiency Improvements

Refinery US Average

Competitive Gap Target Peer Group

Efficiency Gap

120

140

160

180

200

Efficiency Metric, % of Standard

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Impact on 2004 Company Results

Maintenance US Quartiles

Competitive Metric, US $/EDC

15.3 49.3

Efficiency Metric, MEI

66.3 184.7

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Benchmarking Topics
Introduction Solomons Key Metrics Performance and Gap Analysis Cat. Cracking Performance Analysis

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Study Focus
Raw material selection Product yields Plant utilization Operating cost analysis Energy efficiency Maintenance and reliability effectiveness Labor productivity

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Operating Expense Breakdown

All Other Fixed Costs, 1% Energy, 59%

T/A Maintenance, 7%

Non-T/A Maintenance, 7%
NonMaintenance Personnel, 8% Other VolumeRelated, Chemicals, 4% 3%

Catalysts & Catalyst Additives, 11%

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Yields and Margins

4% 2% 4% 1%

Raw Material Breakdown

36% Unhydrotreated Feedstock

21%

2%

Hydrotreated Feedstock

4%

20% 6%
Heavy Gas Oil All Other
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Vacuum Gas Oil Atmospheric Reduced Crude Light Gas Oil

Yields and Margins

Raw Material Pricing Adjustments Various gas oils sulfur and aniline point Heavier feeds sulfur and Concarbon residue

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Yields and Margins

Product Pricing Catalytic naphtha based on gasoline blending value Light-cycle oils valued as distillate feed or blending stock; dependent on local market Heavy-cycle oils and slurry valued as fuel oil blending stocks Butylenes and ibutane valued as alkylation feeds Propane and nbutane valued as finished products Propylene valued as chemical feed
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Net Cash Margin Distribution

By Region
25

Net Cash Margin, US $/bbl

20 15 10 5 0 0

Non-US Countries
1Q/2Q Break 2Q/3Q Break

United States

3Q/4Q Break

25

50 Percent of Participants

75

100

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Range of Study Performance

US $/bbl
Average Value

Gross Product Value

47.19 60.27

Raw Materials Cost

29.25 49.21

Gross Margin
5.95 24.56

Operating Cost
1.67 4.43

Net Cash Margin

3.68 21.10

Lower Values

US $/bbl

Higher Values
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Net Cash Margin

Net Cash Margin, US $/bbl 19 16 MRCC or RCC

13
10 FCC

7
4

25

50

75

100

Percent of Participation
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Return On Investment
70 Return on Investment, % 60 50 40 30 20 10 0 25 50 75 100 FCC MRCC or RCC

Percent of Participation
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Benchmarking Topics
Introduction Solomons Key Metrics Performance and Gap Analysis Cat Cracking Performance Analysis Use of Benchmarks

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Use of Benchmarks
Establishing a plants performance level Quantification of improvement opportunities by expense type and maintenance category Confirming causal plant characteristics Discovery of practices responsible for performance gaps with Peer Group Provide business case for change programs Convince personnel of need for new targets
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Anniversary

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