PTQ Q4 2022 Issue

A good work process A good work process for choosing hydroprocessing cata - lyst uses these steps:  The unit engineer requests proposals and quotes from catalyst suppliers  The suppliers respond with proposals  The unit engineer leads a cross-functional work group to evaluate the proposals  The decision is made and communicated to all the suppliers. Steps 1 and 2 are in common use throughout the indus - try. It is steps 3 and 4, evaluating proposals and making decisions, where practices vary widely. For ULSD catalysts, keeping the decision criteria to the basics is encouraged: • Performance : Higher-tier catalysts get credit for lower SOR temperature and longer cycle life based on credible independent testing • Service : Supplier services are assessed qualitatively using internal and external data, only noting what stands out as exceptional strengths or weaknesses compared to competitors • Cost : Comparisons are made on total fill cost from unit- specific supplier proposals. Refiners that want to improve profit contribution should avoid using soft criteria that allow subjective assessments, personal relationships, and biases to creep in and distract from an objective assessment of profit impact. Secondary factors and any factors that cannot be objectively demon- strated as outstanding strengths or weaknesses on a com- parative basis should be left out of the decision. There are several fully capable catalyst suppliers for all major applications in hydroprocessing. If your goal is profit contribution, it is hard to justify being captive to any one supplier. We recommend a dual-source strategy where each major hydroprocessing unit has at least two approved sup- pliers with technically equivalent products. Independent data enables success To make a good catalyst decision, you need good indepen- dent data to compare the relative performance of differ- ent suppliers’ catalysts. You would also like reliable data on supplier services and competitive pricing from other catalyst users. You cannot get any of that from catalyst suppliers. Hoekstra Trading provides that data for hydro- processing catalysts. 3,4 Independent catalyst test data Hoekstra Trading has a database from six years of test- ing ULSD catalysts from all major competitors in a stan- dardised pilot plant testing programme. This also includes extensive market research on the catalyst industry to provide refiners with the other information they want for catalyst selection, like supplier service performance, sup- plier costs, pricing, profitability, and shared stories of cata - lyst successes and failures, including dozens of cases like those in Table 1. None of this information is proprietary; it is shared among our client group and is available to anyone at negligible cost.³

and overcomes undue fear of the unknown. Combined with good teamwork from procurement, this results in steady, consistent growth in margin benefits. In the bespoke Case 2, a first success led the refiner to quickly award another big hydroprocessing unit to a different new supplier for more performance benefits and procurement cost savings, replicating the first success within two months. Early adoption The following standardised catalyst testing programme proves good new catalysts by testing them alongside the industry’s best, enabling early adoption of new catalysts that would otherwise sit on the shelf for many years. Early adoption improves the refiner’s profit and, for suppliers, the first sales open the door to market growth. Catalyst suppliers eager for market entry for an improved new catalyst regu- larly share the value of early adoption with astute, proactive catalyst users who have what is needed for confident deci - sions their competitors cannot make. For example, bp was among the first to use Albemarle’s STARS Type II catalysts and the first outside ExxonMobil to use Nebula bulk metal catalysts (ULSD) for ultra-low sul- phur diesel.¹ Soon after, bp’s standardised catalyst testing programme proved equivalent performance for catalysts from ART, Axens, and Topsoe, which had only single-digit market shares, and convinced all bp refineries good Type II catalysts were available from five different sources. 2 These new catalysts would significantly increase the kinetic capacity of existing units, reducing the capital investment required for ULSD, and reducing catalyst cost and lead time requirements for ULSD implementation. This multi-source strategy gave bp a huge advantage over com- petitors that limited their options to only the best-estab- lished market-leading suppliers. The standardised catalyst testing programme and dual- sourcing strategy also enabled bp to lead the industry in early use of ART, Axens, and Topsoe Type II catalysts in all its FCC feed pretreaters with equal or better performance and combined procurement savings exceeding $50 mil- lion. Early adoption and fast replication of these catalysts by bp opened the door to spread the use of ART, Axens, and Topsoe catalysts throughout the industry over the next 20 years. Supply flexibility A dual-source strategy reduces the risks of being a captive customer. For example: • In cases 1, 4, and 6 in Table 1, the refinery needed quick access to a specific refill catalyst historically supplied by only one supplier, a problem that was immediately rem- edied by going to a different supplier with a better catalyst, not on the approved list • In all six previous examples, a new strategy fostered cross-functional teamwork and networking among cen- tral and field departments around a new work process focused on profit contribution with benefits in performance and cost. The new work process helped overcome undue risk aversion and conflicting interests that can otherwise obstruct the realisation of good profit opportunities.

PTQ Q4 2022