Optimization

Also known as: refinery planning

Optimization is the process of making near-term commercial decisions around the refinery so as to maximize refinery profitability.

The key decisions that the optimization process tends to focus on are:

  • Feedstock selection – This includes decisions around which crude oil grades to buy, what sequence and combinations to run them in, and which intermediates to buy and sell
  • Product slate – This includes decisions around which refined products to make, how much of each product to make, what qualities to make of each product, and what channels to sell the product into (e.g., spot vs term, bulk vs rack vs retail, branded vs unbranded, etc)
  • Refinery scheduling – This includes all major decisions around running the refinery on a day-to-day basis such as utilization rates, cut points, unit severities, and unit modes
    Product blending – This involves detailing the specific blend recipes for individual batches of products using different available intermediate blend stocks
  • Logistics scheduling – This involves all decisions around when and where to receive incoming crude and intermediate cargoes (by ship, barge, pipe, etc) and when and how to move outgoing shipments of finished product

Optimization tools

The planning and optimization process uses a number of sophisticated tools to make decisions and to formulate plans for the refinery. The most important are:

  • Refinery linear program (LP model) – The LP is a tool used to find the margin maximizing crude and product slate for a refinery, subject to the market and operational constraints that a refinery faces at a given point in time
  • Refinery scheduling model – The scheduling model translates the high-level plan generated by the LP model into more detailed and actionable daily operating instructions for the refinery. It is a simulation model (not an LP) with much greater granularity and accuracy than the LP, but without the ability to optimize
  • Blending model - The blending model is a specialized LP model focused on optimizing the batch-by-batch blending of finished products using available blend stocks, and seeking to maximize overall product slate value
  • Logistics scheduling models – There are typically a number of detailed logistics scheduling models used to keep track of and to plan for receipts of crude and other feedstocks and outward movements of products
  • Crude cutting tool – This is a support tool used to create the crude assay information that the LP and scheduling models need to run. This model takes a generic laboratory assay and translates it into a format and cutting scheme aligned with refinery operations and the LP and scheduling tool formats
  • Process unit simulators – These are detailed models of individual process units that are used to assess the performance of the unit (yield and product quality) at different feed qualities, utilization rates, and operating conditions. These models help in generating the yield correlations used to represent each unit in the refinery LP and scheduling models

The Refinery Reference Desk includes content derived from our industry experts as well as from public data sources such as company websites. Nothing herein is intended to serve as investment advice. This material is based on information that we believe to be reliable and adequately comprehensive, but we do not represent that such information is in all respects accurate or complete. McKinsey Energy Insights does not accept any liability for any losses resulting from use of the content.



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