The amazing investments that are easily justified in the Petroleum industry.

Thread Starter

GopherT

Joined Nov 23, 2012
8,009
Some of the worlds biggest construction projects are related to energy and transportation. Here is a relatively small section of a refinery, the residual coking tanks. After nearly 50-years of use, they need to be replaced - in a plant where replacement was never planned. Answer, bring new tanks from Spain, close LA to move the tanks from port to refinery, get a big-ass Crane to lift the superstructure away from the old tanks and drop in the new tanks. Easy, but expensive.

 

wayneh

Joined Sep 9, 2010
17,498
After nearly 50-years of use, they need to be replaced - in a plant where replacement was never planned.
That's one thing I was always puzzled about working in industry. Most plants I saw were built or rebuilt with 15-20 year designs. And yet most plants operate much longer than that and are 50-100 years old or more. Something seems askew. I've never really studied it in detail, but I suppose it has a lot to do with the time-value of money. You plan to replace capital 20 years from now with future dollars, instead of paying present dollars today to buy equipment to last longer. Planned obsolescence, in other words. Screw the next guy to save money now.
 

#12

Joined Nov 30, 2010
18,224
That was once in a lifetime brilliant...then some talking head pees in it with words like, "responsibly, efficiently, and environmentally, for the community etc.".
Shut up and allow this spectacular mechanical success to bathe in it's well deserved glory.
The rest of you can turn the video off at 5:06
 

Thread Starter

GopherT

Joined Nov 23, 2012
8,009
That's one thing I was always puzzled about working in industry. Most plants I saw were built or rebuilt with 15-20 year designs. And yet most plants operate much longer than that and are 50-100 years old or more. Something seems askew. I've never really studied it in detail, but I suppose it has a lot to do with the time-value of money. You plan to replace capital 20 years from now with future dollars, instead of paying present dollars today to buy equipment to last longer. Planned obsolescence, in other words. Screw the next guy to save money now.
My job is at the intersection of research, design engineering and marketing.
- What product to launch,
- What price point do we need to meet ( what is the competitive landscape)
- what market share can we capture with various price points
- what will our competitors do if we enter?
- how much capacity do we get for a given investment
- how many years before we break even?
- how can we build a plant Building a plant big enough to supply a market that has?

It is very difficult to build a plant now, that will be competitive 20-years from now because your competitor will have built a bigger one in the mean time. On the other hand, spending too much up front when the volume you can sell is small is not a good time to build a plant that is "world scale" for a market 20-years in the future. It is all about making hay while the sun shines, depreciating your plant in 10-years and either debottlenecking, adding capacity, building a whole new plant somewhere else in the world, or scrapping the current one and building a new one using the latest technology.

Lots of analysis on a monthly/annual basis to stay competitive.
 

wayneh

Joined Sep 9, 2010
17,498
My job is at the intersection of research, design engineering and marketing.
- What product to launch,
- What price point do we need to meet ( what is the competitive landscape)
- what market share can we capture with various price points
- what will our competitors do if we enter?
- how much capacity do we get for a given investment
- how many years before we break even?
- how can we build a plant Building a plant big enough to supply a market that has?

It is very difficult to build a plant now, that will be competitive 20-years from now because your competitor will have built a bigger one in the mean time. On the other hand, spending too much up front when the volume you can sell is small is not a good time to build a plant that is "world scale" for a market 20-years in the future. It is all about making hay while the sun shines, depreciating your plant in 10-years and either debottlenecking, adding capacity, building a whole new plant somewhere else in the world, or scrapping the current one and building a new one using the latest technology.

Lots of analysis on a monthly/annual basis to stay competitive.
Yup, all true. I worked in an industry that add an additional complication, biotech. There was plenty of competition based on manufacturing prowess, but the really big factor was genetic work on the microbial strains used to make our products. There are only two sure things: If you do no R&D the yield will not increase and, if you do the research, the gain in yield is not predictable. So an entire plant needed to serve an industry today might require just another fermentor in an existing plant in a few years. Do you spend $10 million on R&D or do you just build a bigger plant? You end up in a lot of meetings.
 

atferrari

Joined Jan 6, 2004
4,769
Some of the worlds biggest construction projects are related to energy and transportation. Here is a relatively small section of a refinery, the residual coking tanks. After nearly 50-years of use, they need to be replaced - in a plant where replacement was never planned. Answer, bring new tanks from Spain, close LA to move the tanks from port to refinery, get a big-ass Crane to lift the superstructure away from the old tanks and drop in the new tanks. Easy, but expensive.

Just 4 weeks to assemble the crane...!
 

Thread Starter

GopherT

Joined Nov 23, 2012
8,009
That was once in a lifetime brilliant...then some talking head pees in it with words like, "responsibly, efficiently, and environmentally, for the community etc.".
Shut up and allow this spectacular mechanical success to bathe in it's well deserved glory.
The rest of you can turn the video off at 5:06
Those kinds of words seem like crap and I understand they are a turnoff in this particular video. However, I've seen an industry evolve over the past 40-years and it is amazing what can be done of you make something important, measure success and make sure people can succeed.

20+ years ago We would have 3 to 5 injuries per 100 full time employees in one year. We praised ourselves because we were about as safe as career x, y or z that didn't do dangerous things like us - we worked with hazardous chemicals. Careers like insurance salesman had higher OSHA reportable illness and injuries so we felt good about ourselves. In the past 6 years, the industry started a program called, zero incident mindset". The concept that every accident is preventable. Our plants are unrecognizable, no hoses, cords, ladders, tools laying around. Everything is put away, team members walk with full awareness of their surroundings. Constant communication of what is happening. We haven't had a single OSHA reportable accident in three years. Environmental emissions are way down too. So, believe it or not, I kind of like seeing our upper management team stepping up and talking about safety and environment. It makes the price seem higher or the work seem slower but it is not. The long term cost is much lower - no lost time or medical bills in three years also means workmens compensation insurance is way down for our industry. Employees also like their jobs a lot more.
 

wayneh

Joined Sep 9, 2010
17,498
Our plants are unrecognizable, no hoses, cords, ladders, tools laying around. Everything is put away, team members walk with full awareness of their surroundings.
These are the kinds of things savvy customers look for when touring supplier plants. Specifications negotiated in the front office are one thing, but you learn a lot more about a company by how they run their plant, the attitude of the workers. I used to have Anheuser Busch as a customer (while they were still U.S. owned) and they were perhaps the most picky I can recall. "Why is that operator's coat on the back of his chair, instead of hung up?" That sort of thing. A few folks bristled at first to such rigorous review, but in the end it was clear that our plant became a better place by stepping up to those high standards.
 
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