Interview with Dr Gabor Kenessey, general manager, Supply Chain Management, Orpic.
What are some of the benefits of being a refinery-petrochemical integrated company?
The benefits are of three dimensions. The first one is simple operational synergies, which can be achieved at an early stage between petrochemical and refinery plants. There are a lot of chemical and petrochemical feedstock produced in a refinery as well as side stock products in a petrochemical plant, which can be upgraded to refineries in order to maximise the value of utilities, feedstock, intermediate products, and more.
The second dimension is achieving business excellence by sharing best practises in operations, maintenance as well as other supporting services like IT, HR, finance etc.
Last but not least, there are some benefits of having an aligned strategy and a clear way forward in terms of growth, strategic planning and the markets to approach by having both refinery and petrochemicals going hand-in-hand to explore these opportunities.
What are the challenges involved in refinery-petrochemical integration?
I do not foresee any particular challenges except the usual challenges of any integration like the lack of leadership, alignment and engagement, while also not being careful with planning and assessing risks and barriers. However, there might be issues occurring like legal aspects, lender contracts not impacted and governance. The articles of associations can handle this, but in case of integration, the most important factor is to have a unified governance structure, which will cascade down the integration in a smooth way.
How refinery-petrochemical integration is organised?
Integration is not a one-off exercise, it is a journey. Typically, an organisation starts with the highest level of integration, having one unified governance like a board, and then it has one focal point like a group CEO, and then it starts integrating the business functions, sales and marketing, optimisation, planning, and then the support functions, HR, IT, finance, legal, and then it merges operations, maintenance and technical services. So, it takes a considerable time beyond a year to reach the level of a fine structure.
What are the steps taken to optimise refinery-petrochemical integration?
Optimisation happens on various levels. First and foremost is the business optimisation as it represents the core business and where money comes out from. Business excellence does not mean cutting cost and decreasing headcounts. This will not deliver business value. It is how the organisation optimises the business and makes sure how the firm gets the best out of it. The organisation has got to make sure that it has achieved the best out of whatever it has, the streams, the feedstock, the intermediates, and the market. Optimisation can happen also on other directions like financial optimisations – so optimise the working capital, optimise the project finance, and optimise the lender structure.
How costly is refinery-petrochemical integration?
As usual, there is a cost associated with the integration, whenever an organisation integrates, or unifies processes and systems across the organisation, it will need some cost like unification of the ERP systems and implementation of new systems. This comes as a cost. However, the typical experience is that the benefits come out of the synergies in business excellence and aligned strategies, at least of magnitudes higher than the cost associated.
Can you please give an example of integration?
Orpic went through the integration journey starting in 2011 and actually there is a lot of knowledge and experience within the company related to this. We have learnt a lot from our mistakes. Most importantly, what Orpic has learnt is not only how to make it successful but also how to make it specific to the Omani culture, an environment which is unique.
There are quite a number of risks associated with any kind of integration. One of the enablers to succeed is to carefully identity and mitigate those risks. People of the biggest potential represent the biggest risks. Hence, continuous communication, and clear and transparent way of conducting the integration is key to get people aligned and to build trust.