Turning around your turnaround process
Time is money, and nowhere is that truer than for turnarounds at chemical companies and refiners. Those scheduled maintenance and repair projects, which can cost millions of dollars to hundreds of millions of dollars, often take significantly longer and cost much more than originally budgeted, according to EY research.
Turnarounds: often late and over-budget
Turnaround projects have varying complexities and costs, but investors expect at chemical companies and refiners to complete those projects on time and on budget. Beyond investor expectations, two other current market forces — an oversupplied global market and the COVID-19 pandemic — make the need to improve turnaround performance even more urgent.
A recent construction boom for some types of chemical processing plants has led to an oversupplied global market that has reduced margins for many products. COVID-19, in addition to causing a sharp decrease in demand for chemicals and refined petroleum products, has prevented sitting in a control room and conferring, with plant engineers, operators and budget managers to discuss the turnaround schedule.
For businesses that have not automated or digitized their turnaround process, the loss of person-to-person interaction may lead to the turnaround being completed late and over budget. EY research has shown that in large, complex capital projects at energy companies, including the oil refining segment, 73% of projects were behind schedule; 64% faced cost overruns, and estimated completion costs were 59% above the initial estimate.
This highlights the turnaround project that comes in on schedule and on budget remains the exception, not the rule.
It’s easy to understand why so many turnaround projects go awry. It can take up to two years to scope, plan and schedule a turnaround that lasts 6—12 weeks. Improving turnarounds requires a high level of coordination and flawless execution of numerous steps. (See exhibit 1).