Refinery Operational Economics, Planning and Profitability

Introduction

An understanding of the oil industry in general and petroleum refinery economics, in particular, are more essential than it has ever been. The course is designed to explain and teach the fundamentals of refining economics to specialists and non-specialists (engineers, technicians of the industry) and/or those new to this industry. An economics or technical background is not necessary for fully benefiting from this course and understand course subjects and materials.

The course will be essential and useful for financing and/or marketing people and all who have some involvement with refining or petroleum products. Similarly, a marketing background is not critical, and the course will be helpful to refinery engineers who would like to understand how world petroleum markets have an impact on their refineries and operations.

This program is designed to demystify the important aspects of economics – markets, supply and demand – and finance and financial control of refinery operations and projects, specifically in relation to the oil and gas industry and enable managers to understand how they can make more informed decisions. Understanding the principles of economics and finance will allow participants to see the money implications of the decisions they make. Financial principles are used to carry out strategic decisions about product and project planning, budgeting and forecasting. It’s also used to build business cases, which are ultimately used to justify investments in new products, enhancements, and marketing initiatives. Finally, virtually all personnel in a company/refinery, need to use financial measures to assess how well the product plans, marketing plans, or business cases are performing through ongoing analysis of results. This program is designed to introduce you to the concepts, tools, and methods of economic and financial analysis you need to understand and master in order for you to be more effective in carrying out your job.

Objectives

This program will lead delegates through the complete economic and financial life cycle of a refining project & operations, from inception to project close. Each stage will provide participants with the understanding, skills, and techniques for the successful management of their refining projects and operations.

• Prepare and present the business case & financial plans for a refinery project
• Understand how refineries’ profit depends on location and configuration
• Evaluate the economic strength of refinery installations.
• Improve your understanding of the value of refinery investments
• Learn how to interpret published information on the refining industry
• Discover how to improve the profitability of a refinery

Training Methodology

The course will challenge the participants with exercises, workshops, and presentations. Role-plays and group discussions will make this course a unique and fun experience for every participant. Assessments and gap analysis tools will be used throughout the course. Videos will also be shown to emphasize and clarify some learning points.

Who Should Attend?

Personnel who are involved in managing operations and projects and/or teams and departments, technical professionals involved in research and development, product design, engineering, and other scientific and technical work who are from private and public sector oil & gas companies, including R&D, HR, engineering and manufacturing, project managers, product development specialists, and other members of technical, commercial and service operations.

Course Outline

Financial Management for the petroleum industry

• Financial management objectives
• Inter-relationships of oil prices, interest rates, capital investments, and debt
• Managing risks in the petroleum industry
• Introduction to valuation: the time value of money
• Discounted cash flow valuation

Global oil market outlook

• Energy supply and demand
• Crude oil prices
• Investment and trade flows

Refined products supply and demand

• Refined products applications
• Pricing sensitivity of consumption
• Breakout by sector and regions
• Historic supply and trade requirements
• How supply and demand affect pricing 

Light/heavy differential

• Definitions of light/heavy products
• How different products track each other
• Implications for refineries and investments

Refined products trade and transport

• Import and export markets
• Petroleum shipping: ships size, type, and shipping costs
• Effects on refinery profitability

Refinery assets, evaluation

• Asset value explanation
• Replacement value and fair market value
• Methods of determining value: cost-based, income-based

Refinery new investments/projects

• Project analysis and evaluation
• The financial and business drivers behind projects

Preparing the business case and the project proposal

• How to prepare and present a business case for the project
• Understanding investment, cash flow and budgets
• Financial quantification of project benefits and pay back
• Operating within financial and budgetary constraints

Operating cost

• The capital cost of process equipment
• Economies of scale
• Capital cost estimates
• Fixed and variable operating costs

The profitability of a refinery

• Operation margins
• Calculation of profit margins

Financial control of refinery and financial appraisal

• Conducting a pre and post-implementation financial appraisal
• The financial close of the project
• Creating an action plan for the realization of project benefit
• Managing the realization of benefit
• Operational hand-over from a financial perspective