Presented by: Tom Svantesson Senior RAM Consultant

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1 Presented by: Tom Svantesson Senior RAM Consultant
Lessons Learned from Reliability and Maintenance Benchmarking What Does World-Class Performance Look Like? Presented by: Tom Svantesson Senior RAM Consultant

2 Confidentiality Statement
This presentation is confidential and intended for the sole use of the client to whom it is addressed. The information and methodologies outlined herein are proprietary and their expression in this document is copyrighted, with all rights reserved to HSB Solomon Associates LLC (Solomon). Copying or distributing this material without permission is strictly prohibited. M³ – Measure. Manage. Maximize.®, Comparative Performance Analysis™, CPA™, NCM³®, Q1 Day 1™, EII®, CEI™, CWB™, Solomon Profile® II, etc. are registered and proprietary trademarks of Solomon. The absence of any indication as such does not constitute a waiver of any and all intellectual property rights that Solomon has established. 2

3 Protecting Intellectual Property (IP) Mutual Trust and Obligations
Company Annual Reports & Websites Methodology, Metrics & Database Investment Community Input Data Aggregated Industry Results Client IP Taxing Authorities Client Results Consulting Firms Solomon’s IP Non-Disclosure Agreement (NDA) Potential Third Parties Written authorization required before sharing IP with a third party

4 Comparative Performance Analysis
Solomon began its Comparative Performance Analysis (CPA) approach to benchmarking in 1980 Comparative Performance Analysis Fuel Study (>85% of global refining) Olefin Study (>67% of global manufacturing) RAM Study (>1,000 process industry plants) Power Study (power generation) Pipeline and Terminal Studies Other Specialty Studies

5 International Study of Plant Reliability and Maintenance Effectiveness
Solomon began benchmarking Reliability and Maintenance (RAM) in 1996 Process industry Chemical/petrochemical Refining Developed Equivalent Maintenance Complexity (EMC) factor to enhance data normalization Implemented in the chemical process industry using 17 process families covering >200 chemicals RAM Study redesign based on client feedback 1996 2011 2008 1995 2010 RAM Study developed in response to a request from the Chemical Manufacturers Association RAM Study database contains >1,000 sites with >8,000 process units 2000 2012 Adapted for refining using Solomon Fuels Study process families (e.g., CDU, FCC, etc.) Re-designed RAM Study launched with increased value and decreased client effort

6 RAM Study Indices Reliability and Maintenance Effectiveness Index (RAM EI) Lost margin (due to RAM causes) Maintenance cost Maintenance Cost Index (MCI) – cost improvement Mechanical Availability – reliability Direct Maintenance Cost (craft labor and material) Indirect Maintenance Cost (supervision and staff) Routine and Turnaround Maintenance Company and Contractor Maintenance Expense and Maintenance Capital

7 What is Benchmarking? The process of comparing performance against others in the same or similar industry to Confirm competitive position Gauge the opportunity for improvement Identify practices employed by best performers

8 What is Reliability Benchmarking?
The measurement and comparison of downtime (mechanical unavailability) attributable to RAM causes Downtime translates into lost margin that is often overlooked while focusing on maintenance costs Margin loss should be monetized to gain an appreciation for the value of lost production

9 What is Maintenance Benchmarking?
The measurement and comparison of routine and turnaround maintenance costs Includes direct and indirect costs for company and contractors Also includes maintenance capital costs, which are often ignored and can skew performance

10 RAM Benchmarking? Benchmarking is the use of actual operational performance data to track performance trends, to compare to others, and to identify best practices Benchmarks are fact-based and should not be confused with opinion Benchmark thresholds are realistic, having already been achieved by a subset of the total population

11 Why is RAM Benchmarking Valuable?
Historically, reliability and maintenance have not been managed well, resulting in… HIGH cost and POOR reliability Maintenance is the largest fixed (non-volume-related) cost in a refinery or chemical/petrochemical plant Maintenance is the third largest overall cost behind raw materials and energy Every dollar of reduced maintenance spending goes to the bottom line; consider how much sales would be needed! Every hour of increased uptime increases capacity without capital investment – free capacity!

12 Benchmarking Lessons Learned Myths & Facts!

13 Reliability and Maintenance are Inextricably Linked
Cannot cost-cut your way to improved reliability Maintenance Maintenance costs are driven by reliability…or the lack thereof A 1% increase in mechanical availability can translate into a 10% reduction in maintenance cost

14 Traditional Approach Pressure Applied Here Maintenance Costs
Reliability (Margin)

15 Initial Traditional Result
Pressure Applied Here Lower Reliability (Margin) Lower Maintenance Costs

16 Long-Term Traditional Result
Higher Maintenance Costs Lower Reliability (Margin)

17 Progressive Approach Maintenance Costs Reliability (Margin)
Apply Pressure Here

18 Progressive Result Higher Reliability (Margin) Apply Pressure Here
Lower Maintenance Costs Apply Pressure Here

19 Impact of RAM on Replacement Capital
Quartile Performance Average Maintenance Capital Spent, % of PRV 1 2.1 2 2.8 3 3.4 4 4.6 Conclusion: Better maintenance of existing assets results in lower replacement capital cost requirements. Conversely, poor maintenance of existing assets results in higher replacement capital cost requirements.

20 Factors that Influence RAM Performance >90% Confidence Level
Reliability (failure avoidance) Direct costs (craft labor and repair materials) Maintenance support (e.g., foremen, planners) Turnarounds (frequency and duration) Unplanned failures

21 Factors that Influence RAM Performance >90% Confidence Level
Maintenance planning and scheduling Craft skills and experience Spare parts availability Operator engagement

22 Factors that Do Not Influence RAM Performance >90% Confidence Level
Plant or refinery age Site footprint (geographic size) Plant replacement value Labor rates

23 Factors that Do Not Influence RAM Performance >90% Confidence Level
Contract versus in-house maintenance Production rates Support costs (maintenance/reliability engineers) Management years of experience Union versus non-union

24 Path to First-Quartile (Q1) RAM Performance
<94 95 96 97 >98 1 1.4 >10 Maintenance Cost, % (US $/PRV) Mechanical Availability, % High Mechanical Availability and Low Cost Industry Leaders Sustainable Low Mechanical Availability and High Cost Effectiveness Not Sustainable Facility Efficiency 24

25 Do You Need to Benchmark Your Reliability Performance?
Mechanical availability <96.7% Unreliability (characterized by equipment failures) is your largest downtime contributor Equipment failures are driving maintenance behaviors Total plant maintenance turnaround (shutdown) occurs more frequently than once every 10 years Increased uptime would provide much needed capacity Breakdown maintenance is your normal mode of operation

26 Do You Need to Benchmark Your Maintenance Performance?
Maintenance costs are >1.4% of PRV Maintenance costs are your highest fixed cost Maintenance costs are not effectively controlled Maintenance activities are predominantly corrective in nature (something broke, now you must repair it) Corrective maintenance costs exceed preventive and predictive maintenance costs Reactive maintenance is your normal mode of operation

27 RAM Effectiveness Index Chemicals – Quartiles of Performance (Example)
Quartiles of RAM EI 27 27

28 RAM Study Deliverables Site Detailed Opportunities Report (Example)
Total Opportunities = US $40M

29 MTBF – Pumps By Quartiles of Pump MTBF (Example)
29 29

30 Summary You are not a world-class performer if
Maintenance costs are not below 1.4% of PRV Mechanical availability is not above 96.7% Best performers continue to get better while poor performers continue to fall further behind Regrettably, for some, it is already too late The path to world-class performance begins with the first step…what are you waiting for?

31 Thank You!