"Once we adopted KBC's software, we were able to move from a supply-push model for procuring jet fuel to a demand-pull model that saves Delta about $150 million per year." Jeff Warmann, president and CEO of Monroe Energy, shared how the company’s refinery optimization strategies save money for its parent company.
Keeping a major airline's fleet aloft requires huge volumes of jet fuel—delivered where and when it’s needed and at the very best price possible. So where do you start if that's your job? Just ask Jeff Warmann, president and CEO of Monroe Energy, a wholly owned subsidiary of Delta Airlines. There's probably nobody who knows better what it takes to provide fuel "from wellhead to wing" because there's reportedly no other airline that can lay claim to its own refinery.
"Why would an airline buy an oil company? Well, about 25% of Delta's asset are in the northeastern U.S., where other refineries have been shutting down. 460,000 barrels per day (bpd) of capacity had disappeared from the market. Plus, many of the remaining refineries were built in the 1950s, so the overall system is at capacity and its pipelines are constrained, too," said Warmann, who presented "Driving excellence in the face of disruptive forces" this week at the Yokogawa Users Conference in Orlando.
Refine your own
"These closures, constraints and other factors made it hard to provide the 220,000 bpd of jet fuel that Delta consumes domestically. Worldwide it uses about 300,000 bpd, which makes up about 40% of its operating costs," added Warmann. "And in the New York harbor area, we only have about 2.5 days of fuel storage, which also means we lacked the ability to truly negotiate with fuel suppliers."
As a result, Monroe bought an older refinery in Trainer, Pa., near southeast Philadelphia, from Conoco Phillips for $150 million in June 2012. The facility also included two terminals and 51 miles of pipeline that connected it to the regional distribution chain and the larger world.
After getting its refinery up and running, Monroe ramped up to the point where it presently refines 200,000 bpd of crude oil. "We produce the highest percentage of jet fuel for a refinery, swap out gas and diesel to other suppliers, and buy some jet fuel as well," explained Warmann. "This means we can put jet fuel into the market, which can help reduce prices. We supply jet fuel in Boston, Providence and all the way down to Florida. We also partner with Phillips by exchanging gas and diesel locally for jet fuel in Seattle, the Caribbean and Europe."
Hands-on optimization
To turnaround the Trainer refinery and achieve consistent throughput, Warmann reported that Monroe had to use a series of different strategies, such as risk-based mechanical reliability analysis in an effort to identify and address the root causes of production problems.
"We also do line-of-sight management, which means putting the leaders out in the field with the operators, and using blast-resistant buildings where needed," said Warmann. "We also concentrate on having the right people. This is because companies are people, and if you don't have the right people, it doesn't matter how state-of-the-art your equipment is."
More recently, Warmann acknowledged that Monroe has been using drones to inspect equipment and pipelines, and even using drones with thermal imaging cameras to check for leaks and spills.
Warmann added that Monroe also spends its resources carefully to "get the right molecules in the right place at the right time." Though jet fuel traditionally costs about 3-5 cents per gallon (cpg) more than diesel in the New York harbor area, he explained that Monroe's performance gains have enabled it to produce jet fuel for 7 cpg under the diesel price last year, and reach 9 cpg under this year.
Savings with software
To achieve its refinery turnaround and production optimization, Warmann reported that Monroe has employed several software tools from KBC, a Yokogawa company. These software products include:
• Petro-SIM for simulating various refinery production applications, and developing more efficient processes;
• Production Accounting (PA), formerly named TMS, for mass balancing;
• Supply Chain Scheduling (SCS) to monitor and track activities, production paths and bottlenecks;
• Visual Mesa energy real-time optimization (ERTO) for monitoring the supply side to find the least expensive production paths; and,
• Connecting PA and SCS directly to simplify data gathering and reduce steps in communicating information.
"We had to rethink what reliability meant to us, and use a digital transformation strategy to handle the huge amount of data coming in," said Warmann. "This meant defining goals, modeling work processes, deciding on a software platform, establishing feedback and optimization design, and evaluating the technology so it would fit. We built work processes first, and then found software to match them. We didn't want to build work processes around someone's software.
"Once we adopted KBC, we were able to move from a supply-push model for procuring jet fuel that had less value, and go to a demand-pull model that generated more value. This saves Delta about $150 million per year over the typical supply-push model."
