W3_S.Algheilani_Nelson Complexity Index


Problem Definition

Oman Oil Company (OOC) and International Petroleum Investment Company (IPIC) are considering the construction of crude oil refinery and petrochemical complex at Duqm on the Arabian Sea coast of Oman. They started by conducting a Market and Detailed Feasibility Study for the project. In this Blog an analysis will be conducted of the competitiveness of the proposed Duqm’s refinery compared to others in the region.

Feasible Alternative

One of the measures that are used to calculate the refinery complexity is the Nelson Complexity Index (NCI), which converts the refinery units into factors that are used to calculate each unit complexity factor. Each unit’s capacity will be related to the Crude Distillation Unit (CDU), which is the backbone unit for all refineries and will commission the major processing reaction and will produce the maximum distillated products before any further distillation and hydration as required by every project demands. Table.1 will give an example of the complexity factor of one of the European refinery that is as decent as the Duqm refinery and have almost similar capacity of it.

The Nelson Complexity Index is calculated using the following formula:

Refinery Nelson Complexity = Sum of (Unit capacity/ CDU capacity x Nelson Factor) for all units on refinery [1].

Image

Table.1 Example of Nelson Complexity Factors and Index yields.

 

Development of the Outcome for Alternative

The NCI assigns a complexity factor to each major piece of refinery equipment based on its complexity and cost in comparison to crude distillation, which is assigned a complexity factor of 1.0 [2]. As you can see from Table.1 it shows the results generated using the NCI’s formula, which will be used later to indicate the complexity of the refinery complexity and to compare it with other refineries in the region and the world as well. As you noticed, each unit had been given a certain factor to indicate the capacity and complexity of each one. The summation of the unit Complexity index will give the refinery overall Complexity Index.

 

Selection of Criteria

The final configuration selected by IPIC/OOC and the estimated capacities of every units had been used as input to the NCI formula. Using the NCI methodology, Duqm refinery considered being 7.6 in its complexity.

 

Image

Figure.1 Complexity of world refineries over 200 kbpd

 

Analysis and Comparison of the Alternative

As can be seen from Figure.1, The highest complexity refineries shown in the charts, above 11 complexities, include Lubes production and Aromatics production which increase their complexity index even though the capacity of the refinery is less than the capacity of Duqm refinery. Duqm refinery is almost at the middle of the world refineries that over 200 kbpd with NCI equals to 7.6. As can be noticed from figure.1 most of the world refineries’ capacities are fallen between 200 – 400 kbpd to minimize the complexity of their process. According to Philips 66 companies, it’s reported that its American refineries’ range from 7 to 14.2 [3]. This can give you an indication about the market and the optimum complexity hence the capacity of most of the refineries around the world.  Also, aromatics and lube productions will raise the complexity of the refinery and that will not attract many investors to invest in petrochemicals units as it will increase the risks.

 

Selection of the Preferred Alternative

Duqm refinery chosen the current configuration and optimum capacity to maintain a reasonable Complexity and to minimize the risks associated with it.

 

Performance Monitoring and the Post Evaluation of Result

In order to maintain the same complexity level, for any future expansions. NCI can give the key factors to maintain the same complexity level:

1) By maintaining the optimum ratio between the capacities of any new Units  related to the CDU units, either by expanding the CDU Capacity or maintaining an optimum capacity for the new units.

2) another option is to identify the critical and most complex units that is most likely to be constructed and conduct the NCI ahead to estimate the possible complexity in future plan.

 

References 

1)      Burn, J. (2011, March 30). Supply/Production. Retrieved June 17, 2014, from http://www.theoildrum.com/node/7641.

2)      Nelson complexity index. (2014, May 21). Wikipedia. Retrieved June 17, 2014, from http://en.wikipedia.org/wiki/Nelson_complexity_index

3)      The Economics of Petroleum Refining. (2013, December 1). . Retrieved June 17, 2014, from http://canadianfuels.ca/userfiles/file/Economics%20fundamentals%20of%20Refining%20Dec%2012%202013-final.pdf

Advertisements

One thought on “W3_S.Algheilani_Nelson Complexity Index

  1. WOW!! AWESOME posting, Said!!!! Your case study is excellent, you followed our 7 step process very well and your citations were spot on!!!

    This is EXACTLY what I am looking for each week…..

    Given all these data points, for your W4 blog, would it be possible (do you have the cost and/or duration of each of these projects?) for you to create a linear regression model comparing the cost or duration to the Nelson Factor? Is there a relationship and is so, what is it?

    Keep up the good work and looking forward to seeing more posts like this in the coming weeks.

    BR,
    Dr. PDG, AACE Annual Symposium, New Orleans LA

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s