Excellence in Stationary Equipment Reliability

1. Excellence in StationaryEquipment Reliability by F. Walter Pinto Regional Reliability Manager Lyondell Chemical Company

2. Excellence in StationaryEquipment Reliability • Purpose • Present elements of a successful stationaryequipment reliability program • Share best practices, success stories and lessons learned • Information and tools are widely available Challenge is in IMPLEMENTATION • Stationary Equipment focus - principles apply to other disciplines

3. Lyondell Chemical Company • Leading global manufacturer of chemicals and plastics, a refiner of heavy, high-sulfur crude oil and a significant producer of fuel products • Operations on four continents, nearly 8,000 employees • Lyondell includes 3 wholly-owned businesses -- Equistar Chemicals, Millennium and Houston Refining • Leading capacity positions in all major products • # 106 in the Fortune 500 • Ranked among the industry best in on-the-job safety • Recognized for excellence in corporate governance • Unique culture through integration of predecessor company best practices • Extraordinary success in developing single reliability culture

4. Excellence in Reliability • Reliability : Availability of operating unit on demand • Focused on “Excellence” and not on “Compliance” - applies to all equipment, NOT JUST PSMcovered! OPERATIONAL EXCELLENCE PROGRAM Safety – Environment – Reliability – Cost – Quality People – Community • Demonstrated experience in reliability; driving excellence in safety, environmental, quality and cost performance Competitive Advantage

5. Why Focus on Stationary Equipment? • Accounts for >50% of the capital / maintenance cost and reliability events • Safety, Environment and Reliability • Accounts for a large % of total equipment • Very high consequence due to stored volume • Accounts for very high % of incidents • Critical components in thin sections by design • Extreme operating conditions and damage mechanisms. In most cases damage is not immediate • On-line feed back is not available StationaryEquipment reliability leads overall reliability.

6. Systems X People = Performance

7. Stationary Equipment Reliability Focus Areas • Management Systems • Performance / Inspection / Maintenance Standards, Workflows, KPI and Audits • Engineering Practices • Global Engineering Standards, master databases • Management Support • Continuous, consistent, and at the highest and all levels • Reliability Practices • Corrosion Manual, RBI, Data Management System, FocusedReliability Improvement Programs such as CUI • People • Knowledge transfer, benchmarking, unitinspector concept, training • Implementation Discipline • Maintenance, turnaround, projects, purchasing, warehouse, QA/QC • Operations Discipline • MI-critical variables, MOC, operator rounds, incident reporting

8. Management Systems Compliance Audits Verification system is functioning by outside representatives. Key Performance Indicators Performance-related actionable metrics for reliability and cost improvement Engineering, Inspection and Maintenance Standards Mandatory technical requirements – Single owner responsibility and accountability “How to” documents – plant procedures containing workflow, forms, roles and responsibilities and accountability Inspection and Maintenance Procedures Management systems required at each site Example: A management system exists for notifying past due inspections and recommendations Performance Standards Reliability Beliefs and Principles Foundation

9. Engineering Practices • Global Engineering Standards and Piping Specifications • Single sponsor – responsibility and accountability • Mandatory requirements – reduces debate • Requires strong management support for implementation • Plant or project addenda and deviation process • Administered and kept evergreen by a dedicated group • Continuous improvement - Process to incorporate lessons learned and best practices • Robust computer-based systems for engineering data management Reliability by design

10. Inspection Management • Unit and equipment inspection plans • Jurisdictional requirements • Monthly schedule review • Inspection personnel qualification • Optimization of inspection plan and interval • Materials Diagrams Planning & Scheduling • RBI, RAT, MOC • Leak assessment • Inspection results • Observations and findings Assessments Inspection • Inspection data management • Turnaround Inspection reports • Condition assessment • Fitness-for-service evaluation Evaluation Records Update • Recommendation prioritization • Tracking and closure • Monthly schedule review • Deferral process • Maintenance QA/QC • Receiving Inspections • Conformance to standards Recommendations

11. Inspection Planning

12. RBI Implementation • Over 30,000 equipment items evaluated • $6.5MM annual cost avoidance • Study results are being used to: • Identify and budget for CUI • Determine inspection TA work scope • Focus resource spending to match damage source → 80% leaks areexternal • Unit inspector, corrosion specialist and process engineer participation is critical • Accuracy of process, design and inspection input data • Review of results (especially if a contractor is involved)

13. Mock Exchanger • Suggest having internal qualification process for specialty NDE • Qualification of NDE operator, hardware, and technologies through performance demonstration test • > 60% of technicians failed the tests

14. Inspection Data Management Tools

15. Focused Reliability Improvement Programs • Issues are global in nature and require greater focus in terms of resources and commitment - Integral to Lyondell’s long term reliability philosophy • Corrosion-under-Insulation (CUI) • Storage tank inspection (AST) • Heat exchanger reliability • Painting program • Furnace re-tube • Auto-refrigeration and brittle fracture analysis • Inspection catch-up • Structural remediation • Cooling water performance improvement • Underground leak prevention • Technical Directives – Small bore branch connections • Success factors: champions, leadership and ownership • Special programs can make step improvement

16. CUI Program • Carbon steel in 25 – 300 degree F and stainless steel in ESCC temperature range • Over $150MM committed in 12 years • Ceramic coating/metal cages for personnel protection • Insulation Elimination • Areas not requiring personnel protection and not justified for energy conservation • New Coatings and Fire Proofing • Coatings for cold and damp surfaces • Subliming-type fireproofing • Rope Access • Tower CUI inspection and caulking • Evaluation of each application for cost effectiveness

18. Operations Discipline • Management of change process – involvement of inspection department • Operator rounds • Equipment and piping visual inspections • Example: Insulation damage and CUI awareness • Reporting all non-utility leaks. Consider leaks as failure of RBI to predict - opportunity for improvement • MI critical variables and operating envelop. Incident investigation when exceeded and action plan • Operator training Operators are first-line inspectors

19. Maintenance / Turnarounds / Projects • Risk-based tools for turnaround scope development and prioritization • Total cost of ownership philosophy • Approved Vendor List and audit program • Vendor/Contractor Alliances • Shop fabrication and field construction QA/QC • Receiving inspection, PMI, warehouse control • Quality performance indicators This is where the “rubber meets the road”

20. KPIs and Audits • Performancerelated actionable metrics to improve reliability and cost objectives • Internal metrics: Past due inspections & recommendations, Number of leaks, Weldreject rates, PMIreject rate • External benchmarking - Solomon and API survey • Performance Audits • Verification of management systems • Verification of performance - vertical slice audit • High level plant management support Know where you are and where you are going

21. Leak Reduction Success

22. People • Staffing analysis - benchmarking • Unit inspector concept (~250 PV per inspector) • Corporate specialists integrated with manufacturing • Participation in industry organizations • Knowledge transfer • Engineering standards, guidelines, best practice documents, technical publications • Best practice teams & company reliability conferences • Technical training and mentoring program Don’t let knowledge leave

24. Management Support • Continuous, consistent and at all levels • Executive management support • Demonstrate Return on Investment (ROI) • Long term vision, leadership and commitment • Management Reliability “Lobbyist” or Champions Have your VicePresidents or Plant Managers refused to reduce reliability program budget in financially difficult years? Ours have!!!

25. Concluding RemarksShow me the money! • Cost • Quality • Safety • Environment • People • Community Bottom Line Reliability

26. Glossary PSM – Process safety management QA – Quality assurance QC – Quality control RAT – Retube analysis tool RBI – Risk-based inspection RV – Relief valve TA – Turnaround API – American Petroleum Institute AST – Aboveground storage tank CUI – Corrosion under insulation ESCC – External stress corrosion cracking KPI – Key performance indicators MI – Mechanical integrity MIRA – Mechanical integrity risk assessment MOC – Management of change NDE – Nondestructive examination PMI – Positive material identification