Beginners Guide to Minimizing Hydrocarbon Losses caused by Measurement Inaccuracies in Refineries and Chemical Plants

The purpose of this blog is to outline key steps required to minimize hydrocarbon losses that occur in refineries and chemical plants due to measurement inaccuracies.

Why is measurement accuracy important?

Measuring quantity is a key component of every transaction, and any inaccuracy in determining the quantity can lead to losses.
Example: Have you ever wondered if a 100g chocolate bar actually weighs 100g? What if it weighs only 99g? That’s a 1% loss on every chocolate bar you ever bought. Even if this was true, most of us will not bother to chase this amount because of two (2) reasons:

1. We don’t buy enough chocolates bars in a year to make the dollar amount associated with 1% loss a significant amount for us
2. The escalation process required to make this correction will be long and painful process

However, 1% loss for a refinery or chemical plant with a yearly transaction of $10 billion equate to a loss of $100 million.

Please see the table below with loss estimates based on annual transactions amount, and percentage of measurement inaccuracy:

The cause of any measurement loss is an (1) inaccurate measurement equipment, (2) lack of oversight by the team accountable for its operation, and (3) ineffective escalation/claim team. This blog will briefly discuss how each of these elements can be improved.

1. Improving the accuracy of the measurement equipment: Every equipment has a lifecycle, which implies that it is meant to become inaccurate at some point. However, the life cycle of the equipment can be improved by having a “preventative maintenance program”. Following are the steps required to achieve an effective preventative maintenance program:
   1. Being aware about the inherent uncertainty of the equipment
   2. Identifying the equipment’s life cycle based on empirical data
   3. Calculating the financial value of the product measured using the equipment
   4. Determining the maintenance frequency for the equipment based on the above information

2. Creating oversight on the day-to-day performance of the equipment: The purpose of this is to identify day-to-day inaccuracies in the equipment before they manifest into a loss. A strong oversight can be attained by the following steps:
   1. Comparing multiple measurement equipment during custody transfer: This depends on the equipment available however the following comparisons can be made in most refineries and chemical plants
      1. Conducting 4-point analysis for all marine transfers comparing Shore-to-Vessel, Vessel-to-Vessel, Vessel-to-Shore, and Shore-to-Shore
      2. Conducting a truck/rail-rack analysis comparing Meter-to-Tank or Meter/Tank-to-Truck/Rail
      3. Comparing Meter-to-Meter or Meter-to-Tank for all pipeline transfers

      Alternatively, in all cases measurement figures can be compared with the equipment of one’s supplier or customer depending on the relationship and data availability, however in this scenario the inaccuracy will only be detected after incurring the loss, and therefore this needs to be followed up by an effective escalation and claim process.

   2. Setting appropriate thresholds for variance between various equipment: These thresholds must be based on the inherent uncertainty of the equipment.
   3. Training & Empowering front-line employees to make day-to-day decisions based on these thresholds: Managers must clearly define actions for front-line employees when thresholds are breached.
   4. Build dashboards with key KPIs to track performance on weekly basis, and establish feedback loops

3. Developing a strong escalation and claim process (recover as much of the value of loss as possible): Irrespective of maintenance and oversight some losses always happen however, a strong escalation and claim process enables to retrieve back the loss. Following are the steps required to achieve an effective escalation and claim process:
   1. Well written contract with variance thresholds specified that align with the API: This is crucial because it’s the terms of the contract that dictate what the customer or supplier is obligated to return in case of a loss.
   2. Monthly meetings with CTM Focal Point and Claim team: This is where the CTM Focal point can escalate variances outside the threshold, and provide claim team associated evidences, and value so that the claim team can put in a claim
   3. Follow up meetings with claim team: Claim team provides a monthly report stating successful and unsuccessful claims in follow meetings