Downstream’s balancing act: juggling risk, cost and performance

Silhouette of oil and gas refinery industry plant

Navigating the next normal is a risky business. And how to create the perfect balance between risk, cost and performance was the subject international downstream leaders were juggling at a recent virtual round-table.

Chaired by Bob Gill, General Manager, Southeast Asia, ARC Advisory Group, the high-level discussion brought together senior professionals from Reliance Industries, India’s Ministry of Petroleum and Natural Gas, PRefChem, Hengyuan Refining Company, Saudi Aramco and Pertamina to discuss navigating a circular economy, how digitalisation has helped – and increased – security risk, and how risk mitigation can have real business results.

A cyclical economy

 “The current economic climate has significantly impacted all business across the world”, confirmed Suhas Japtiwale, Assistant Vice President Refining and Petrochemicals business at Reliance Industries. “For risk mitigation, this has been a totally different experience”.

For 55% of surveyed industry professionals, economic risk is the main risk facing the downstream industry. For Tan Wei Chen, COO of Hengyuan Refinery, managing it used to be a tried and tested affair. “My refinery has been running 15+ years”, he told the panel. “I’ve seen the ups and down of margin volatility. [We’ve been able to] come back strong and fix issues and run at better optimisation”. The cyclical nature of the downstream economy also added an element of predictability, a “feast and famine” approach, where, according to Tan, “[you could] take it easy when the margins are good! You don’t save, you spend!”

Then came the pandemic, a crisis “a little tougher” than any before. Tan admitted that “Currently economic risk is very high…we can’t control much”. He advised mitigating this by focusing on other risks you can control: “Manage reliability risk. And most important thing mange safety risk. There is no point making money if my guys get hurt”.

Physical and digital safety

Safety was a hot topic, with an interactive poll revealing whether the downstream community thought their sector was doing enough to ensure the safety of operators. 67% felt they were, and according to Rizal Rahman, Head of Operations, Steam Cracker Complex, PRefChem, it’s a case of machine protecting man.

“The advancement of tech like predictive analytics has become a new normal”, he affirmed. This is the new business. We are working with certain vendors [to] provide operators with barcode technology… to scan and tell pressure. [This can] improve efficiency and safety”.

In the era of refinery 4.0, it isn’t just the physical safety of your workforce which is critical. With 88% of respondents assessing the downstream industry’s readiness against cyber-attack as “inadequate” , digital security has become a real world risk.

“The number of successful and sophisticated attacks has been increasing at an alarming rate”, explained Adel A. Benmohamed, IT Supervisor at Pertamina. A hyper-connected plant or refinery will have “multiple entry points in the system … putting a lot of pressure on the IT force”.

According to Imad Aldhfiri, Head of Cybersecurity Risk Monitoring, Saudi Aramco, it is the businesses’ responsibility to make sure we have the right measures as a company and organisation” to monitor cyber-risk.  “You need to focus on what matters most. Define the risk appetite [and implement] performance metrics”.

Where the only way to completely eliminate risk is to “shut down all the servers”, Benmohamed added that people need to step up to protect themselves. “We need to start being more cyber aware”, he declared. “This is not an endpoint, [but] a long journey. It’s like a battle with multiple fronts. We need support! From users! From management!”

One thing is clear, where the battleground is your most valuable digital assets, “failing to support cybersecurity will lead to a lot of damage to the business”. As Benmohamed concludes,  “it’s not nice to have, it’s need to have”.

Risk and Reward

When it comes to steering digital decisions, Tan agrees that humans should still be in the driver’s seat. “The digital world has helped refiners a lot over the last 20-30 years”, he conceded. “Now it’s about the people. Having enough knowledge [and] enough training to make use of the tools.”.

Operators who can communicate their unique digital risk, and what needs to be done to mitigate it, can use data to make a difference to the bottom line.

“Data is just data [and] digitalised process is very widely defined”, warned Tan. “Make sure you know how to justify it… and the business will never say no”.

In a world flooded with data, Kumod Kumar Jain, Executive Director at India’s Centre For High Technology, Ministry of Petroleum and Natural Gas, agrees that it’s the ability to “convert information into a decision making system”, that will make the most difference in analysing and monitoring the risks of the next normal. This will need new training and new resources to empower a next generation of digitally savvy, and risk aware, workers.

“At the end of the day, the data must be useful to someone”, reinforces Rahman “to avoid mishap…”

No such thing as zero risk

“There is no such thing as zero  risk”, Aldhfiri warns. “There’s no such thing as 100% secure”. When it comes to the high stakes of an uncertain next normal, the panellists agreed that it’s a case of living with, rather than eliminating risk completely.

A key part of this is making sure risk mitigation is integrated firmly into the business infrastructure, and budget.

“Risk mitigation is important, and [so is]  budget allocation for that”, stresses Japtiwale. “This is like insurance, we need to spend some money, but we know it’s paying back”.

Strong risk assessment and risk mitigation come at a cost. But for operators who neglect the resources, tools and processes needed to understand and manage physical and digital risk in the new threat landscape, there’ll be a higher price to pay. Performance now relies on people, process, and their understanding of business assets and their exposure. And with the future of a US$ 3.3 trillion industry at stake, it’s a case of high risk mitigation, high reward.

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