Plant Shutdown

How to Mitigate the Effects of a Plant Shutdown

The world over, refineries carry out the crucial role of refining crude oil into gasoline, kerosene, diesel and other assorted petroleum products. There are times that this function is disrupted in a process known as plant shutdown. This occurs for a number of reasons:

  1. The impossibly high prices of crude oil may force the refinery to disrupt its normal operations
  2. Accidental like fires may cause massive damage to the machinery, necessitating a disruption in operations
  3. Natural disasters like earthquakes, typhoons, tornadoes, etc. They may incapacitate the operations of the plant rendering it inoperable.
  4. in accessibility to raw materials that are needed for the operations of the plant may lead to the unplanned disruption of operations in the refinery.

The disruption to the normal operations of the plant will definitely cause an interruption in the supply of the petroleum products to the clients. A firm therefore needs to develop sound strategies to mitigate the effect of the plant shutdown. This is principally because the low supply will directly impact on the price of petroleum products, due to the laws of demand and supply.

How a firm effectively deals with this problem will be influenced by a number of factors. First, a lot of Geo-economic dynamics come into play. A firm that is situated in the US or Europe will experience less down time because of its close proximity to the requisite expertise and materials necessary to resolve the problem. The US firm will find it easier and more convenient to contract Engineers necessary to correct the anomaly, than a firm in West Africa. However, the firms in the Third World may have a marked advantage over their Western Europe or American counterparts when it comes to environmental issues. The American firm would have to abide by stringent safety, health and environmental requirements before the government gives them the nod to resume operations. This may not be the case in Guatemala or Algeria, where the standards may not be so high.

Being unplanned, a plant shutdown can occur at anytime and without notice. However, the loss that may be occasioned by this occurrence can be lessened by the operators anticipating the disruption and taking the following measures:

  1. The firm should conduct a regular inventory of its equipment, paying particular attention to their condition.
  2. The risk profile of the equipment should be done and the appropriate insurance covers arranged.
  3. The company should identify the critical experts that it would call on in case of a shutdown. The firm may consider putting such experts on retainers if it is not too costly.
  4. Identify alternative sources of raw materials – oil and gas.

If the firm invests in a flexible resource pool and is well organized, then a plant shutdown need not cripple its operations.

dingwangltd / July 27, 2016 / Oil & Gas