Do refiners buy catalysts on relationships or economic value?
Which would a catalyst sales person rather have: a strong personal relationship with the key decision maker, or the catalyst offer with best economic value?
I have asked this question of 100+ catalyst sales people. Most say they’d rather have the personal relationship because it has more impact in affecting sales.
Having worked my entire career on the refiner’s side of the table, I agree, relationships tend to carry more weight than economic value in catalyst decisions. Our research reports contain lots of hard data proving this tendency.
Flexible supply strategy
A flexible supply strategy runs counter to this tendency. Therefore, a flexible strategy requires some leadership and willingness to manage tensions among stakeholders. But it has many benefits. It enables effective use of the capabilities of our catalyst suppliers who continue to lead the way with improved technology and catalysts for clean fuels; it enables buying those catalysts at good prices; and it provides flexibility to respond to unexpected market changes which can otherwise lead to critical supply or business failures.
High catalyst cost helped bring down Petroplus
The 2012 bankruptcy of Petroplus is a case story of business failure triggered by failed catalyst strategy. That case was summarized in an article published in the March 21, 2012 issue of Refinery Operations, copied below:
Before declaring insolvency in January 2012, Petroplus was making good progress toward reducing operating costs in their refineries. Their commitment was to achieve operating cost savings of $80 million per year within 3 years. In 2011, $50 million savings were achieved through staffing level reductions (both employees and contractors), pension plan adjustments, and maintenance cost efficiencies.
But those savings were wiped out by two bad surprises that came to light in the 2011 profit report. They were negative foreign exchange impacts of $35 million and unexpected catalyst cost increases of $20 million.
These unexpected, avoidable cost increases were enough to cause Petroplus’ bankers to pull the plug, triggering the insolvency and ensuing shutdown of five Petroplus refineries in January 2012.
For several years prior to insolvency, Petroplus employees knew they had big opportunities to improve catalyst selection and procurement. But efforts to achieve those savings were thwarted by resistance to change across the Petroplus group, especially in how catalyst decisions were reached and contracts awarded. Historical relationships, personal connections, and old ways of working proved impossible to break.
As a result of supply inflexibility, Petroplus suffered unnecessary and intolerable catalyst cost increases.
Late in 2011, the Petroplus Coryton UK refinery, acting on its own, took steps to enable improved catalyst strategy. Those steps included purchase of the shared-cost independent catalyst testing data offered through Hoekstra Trading LLC. The Coryton refinery is now using the Hoekstra Trading data in a strategy to choose the best catalysts for each unit’s service, buy those catalysts at better prices, and protect from the risk of similar bad surprises in the future.
Currently, only the Coryton, UK and Antwerp, Belgium refineries remain in operation. The future of both refineries remains uncertain; but it is clear their future operation will be accompanied by new ways of working to protect from $20 million bad surprises in catalyst cost.
“High Catalyst Cost Helped Bring Down Petroplus”, by George Hoekstra in Refinery Operations, March 12. 2012
More details of this case story and many other case stories are included as attachments to Hoekstra Research Reports 3 and 4.
Recommendation
Which competitive catalysts are you considering for upcoming reloads? We have the hard data and knowledge base to help you do a good apples-to-apples comparison of their profit impact in your unit.
If you’re not yet in our user group, your first step is to buy Hoekstra Research Report 3. It is easy to do . . no contracts, no lawyers, no non-disclosure agreements are needed. Just use the sample invoice in this brochure as a template to prepare a purchase order to buy Report 3. Then convince your boss to sign it, and E-mail the PO to us today.
For $50,000, you’ll get Report 3 at the speed of light and immediate access to $1,600,000 of scientific information plus technical service that will help you make your refinery’s best-ever catalyst reload decisions in 2022. Don’t live for years with inferior results just because you decided to try to do the job without this inexpensive, quality tool.
George Hoekstra
+1 630 330-8159
