Value Engineering

SIBUR has developed competencies in VE for capital allocation and has made strides to finalise VE methodology and bring it to common processes. In a way, it is quite standard, but there are many hidden pitfalls.

Planning stage and start of works

VE begins during the contract stage with licensors/engineering companies where documents come with requirements to VE process and scope.

A project manager choses experts from the Sibur VE Expert Net, a multidisciplinary team of specialists with varied competencies in such areas as civil/structural, instrumentation, process technology, equipment, etc. The Expert Net is an internal society of specialists that was created in order to make the VE process more effective: including those familiar with various technologies implemented at different facilities.

Other key constraint is time. VE procedures are incorporated into project execution plans minimising any impact on timelines.

Information stage

Team members get acquainted with project documentation (i.e. material and heat balances, PFDs, equipment list, etc.), focusing on key cost-driving components. VE heads systematise the work by preparing special check-lists for documentation, in which all available information is connected to possible areas for optimisation. Areas with the biggest possible impact on project economics are prioritised, and experts identified.

Ideation and evaluation stages

Experts challenge project design choices to eliminate unnecessary functions or provide ideas on how functions can work for less cost. The VE team taps the VE knowledge database for ideas from previous sessions that could be relevant in the current project. This approach helps to create higher standards: the best decisions become requirements for future projects. The development of technological foresight helps the VE team to find next-generation solutions over common ones (e.g. divided-wall columns (DWC), APC based on kinetic models, etc.)

Digital process simulation techniques are of particular advantage to the VE process in petrochemistry. The team employs process simulation specialists in VE sessions on a regular basis. These process models show different scenarios, their efficiency as well as making pinch analysis of process diagrams and finding energy-saving solutions.

The idea stage concludes with the team leader composing a proposals list, which encompasses all information: discipline, description, feasibility, potential, author’s name, and supplementary materials. The proposals list is tailored for easy understanding, in order to avoid misunderstanding during the evaluation stage.

After the idea stage the VE team presents in a special evaluation session to a board of experts from various background: financial, technical, mechanical, safety and others. Its main goal is to provide clear feedback on each generated idea and to decide which idea deserves further development. This can be done online.

The proposals list is updated with all remarks and associated risks. In cases where the project is based on licensed technology, all ideas are presented to licensor representatives in order to avoid any license violation. Based on previous sessions experience, most of the cases with licensed technologies show that even well-known and extensively studied processes have an optimisation potential and should be analysed.

To understand its own VE process efficiency and to find possible areas for its improvement, management conducts special revision sessions for key projects on a regular basis. Figure 1 shows a revision of ideation and evaluation stages made for one of the latest SIBUR projects.

Figure 1. Ideation and evaluation stage by sessions.

The VE team proceeded with an approach similar to Agile. There were three stages (sprints) of optimisation during project development. Figure 1 shows that the first and third stages were effective in producing viable ideas for cost-cutting decisions, while the second stage showed a low ‘buy-in’ level for the optimisation scenarios. Despite efficient idea generation, VE experts and the project team had to decline most of the technology related ideas in the evaluation stage. The core reason for that was ongoing work on finalisation of the project design documentation, which led to difficulties in validation and risk analysis. The second reason was the lack of a feasible economy target: project CAPEX was still under consideration. Even with lower accepted ideas, the second session turned out to be fruitful for its upside conceptions.

Meanwhile, with the validation of project configuration, project CAPEX on a FEED stage increased by 6% from its pre-FEED numbers (second session).

The addition of actual costs and design documentation for the project reinvigorated the process. This pushed the VE team to reopen some of the upside and even closed ideas from the second session. After another evaluation of risks, additional management focus on the project and closer collaboration with the operations and plant design office the third VE session concluded with a much more successful CAPEX and OPEX reduction.

The target areas for optimisation followed predictable metrics: the first and second stages focused mainly on technology and the optimisation of ISBL equipment and technology, but later on, having more detailed FEED, the team focused on OSBL, secondary equipment and construction (see Figure 2).

Figure 2. Effects of VE sessions per optimisation area.

Development stage

The team uses a special ‘idea report’ which comes with a basic and an alternative scenario, including process flow diagrams and a description for both. This part of the document helps an engineering contractor to implement changes in a project’s documentation.

During the risk assessment session, an expert group determines all risks and estimates probabilities and effects of consequences. Then it calculates the overall financial impact for the original and optimised scenarios to check if the idea worth implementing. The economic evaluation includes the projected discounted cash flow in order to show the idea’s influence on a project’s net present value. Also, the risk assessment prohibits ideas that decrease quality or safety standards.

For example, one of our projects involved unit for removal of sulfur compounds and water from natural gas liquids (NGL) using a few stages of separation and with the addition of costly reagent. One of the main problems was an unstable feed flow to the unit due to daily blasts of NGL from the supplier’s collector. Solving this required maintaining levels in the feed drum and that was accomplished by returning part of the treated NGL from the product drum during low feed flow periods. SIBUR’s simulation department created a dynamic model of the unit and tried out all possible scenarios for maintaining feed drum level without returning any treated NGL. The group presented the best option to an engineering contractor and site representative. Its implementation led to a roughly 60 % reduction in reagent consumption.

Implementation stage

An ‘implementation tracker’ includes all accepted ideas and their status (i.e. ‘for implementation’, ‘requires further development’, etc.). It also shows the project’s stage and links up activities associated with the x on a timeline.

All implemented ideas become part of a ‘best practices’ list and are recommended decisions for further projects, if applicable.

Conclusion

Value Engineering is a proven way to higher financial performance. SIBUR’s experience has led it to seek expansion in areas from the expansion of the expert net to the implementation of digital instruments (e.g. for VE risk analysis) to close collaboration with partner licensors and engineering companies. Tailoring each stage into a company’s core business processes brings success in their implementation, and their rollout to other projects. This is a vital component in creating competitive and efficient projects - absolutely key to getting ahead in modern day petrochemicals.

Read the article online at: https://www.hydrocarbonengineering.com/petrochemicals/04032021/value-engineering/