Optimize company-wide management of energy efficiency

As a major company in the chemical industry, Lyondell Basell (LYB) has an important role in driving change. LYB supports the objectives of the Paris Agreement to limit global temperature rise to well below 2°C above preindustrial levels and to pursue efforts to limit the temperature increase even further to 1.5°C.

LYB is committed to reducing GHG emissions from its global operations and value chain and delivering solutions that advance customers’ climate ambitions and support society’s transition to a low carbon world. As companies within its value chains increasingly set their own Scope 3 goals, it is the company’s belief that ambitious climate goals will be an advantage. LYB aims to deliver low carbon footprint materials that will meet increasing demand across the value chains. (1)

LYB goals:

• Achieve Scopes 1 and 2 net zero GHG emissions by 2050 (2)

• Reduce absolute Scope 1 and 2 GHG emissions 42% by 2030 from a 2020 baseline

• Reduce absolute Scope 3 GHG emissions 30% by 2030 from a 2020 baseline

• Procure a minimum of 50% of electricity from renewable sources by 2030

(1) Lower carbon when compared with fossil-based alternatives.

(2) LYB's 2050 net zero goal includes Scope 1 and 2 emissions.

The Value Enhancement Program (VEP) is a company-wide program, that expands capacity through low-cost debottlenecks and improved reliability, reduces costs and emissions by saving energy and increases margins through improvements in procurement, logistics, and customer service.

VEP builds empowerment and collaboration within, between, and across geographies by leveraging the power and expertise of the employees. Employees are invited to provide ideas, which are discussed, quantified and assessed. This process helps to generate an entire portfolio of strategic initiatives that can deliver value.

At the end of 2023, VEP benefits were estimated to have a year-end run rate of approximately $300 million of net income which, after adding back income taxes and depreciation and amortization of $75 million and $25 million, respectively, results in approximately $400 million of recurring annual EBITDA, which exceeded the original expectations.

The core approach and aim of the LYB Value Enhancement Program (VEP) is finding value within the organization, not just focusing on capital or site-specific projects, but also functioning across the entire organization. The Center of Excellence (CoE) brings project management knowledge and approaches to initiatives beyond capital projects, addressing site-level work and aspects such as information flow. They look at a wide variety of energy saving initiatives and apply project management principles to drive results and ensure completion. This approach involves listing, sorting, prioritizing and assigning resources to ideas, holding sites and support organizations accountable for scheduled execution.

The initiatives often originate from site engineers who already have energy saving ideas. The CoE provides the necessary resources and support to bring these solutions to fruition, making the project ideas site-led. Additionally, the CoE has defined operational excellence best practices for different CoE sub-workstreams such as reliability and maintenance, and they are actively partnering with sites and other support functions, where identified (such as Procurement, IT and Digital) to implement these best practices globally.

Energy efficiency is one workstream supported by the CoE. It focuses on Scope 1 and 2 emissions and the greenhouse gas impacts of all projects, considering how capital spending affects the carbon footprint. This helps LYB account for costs or savings related to its climate targets.

Another role of the CoE is to facilitate partnerships between groups such as manufacturing and procurement. The CoE coordinates these groups, understanding and managing the carbon footprint while rolling out projects across nearly 100 manufacturing sites. When one site has a great idea, the CoE helps propagate that improvement to other sites.

In summary, this structured program has significantly helped LYB drive improvements at the site level, distribute projects and ideas, and implement them quickly and effectively.

Here are two examples of energy efficiency measures from the VEP.

The first is the optimization of a distillation tower to reduce steam usage. Site engineers identified that by retraying and optimizing the operation of the distillation tower, significant energy savings could be achieved. The retraying cost approximately $300,000, but this measure resulted in energy savings of about $300,000 annually. This project generates value for the company and simultaneously reduces CO2 emissions.

Another example of an energy efficiency measure is the reduction of fuel gas usage following furnace efficiency improvements. LYB operates furnaces within its cracking units, which are highly energy-intensive. By implementing an enhanced cleaning method for the heat exchange equipment, the company was able to lower fuel gas usage and reduce maintenance time. This improvement incurred no additional cost but generated nearly a million dollars in recurring annual benefits. Initiated and executed at a specific site, the CoE aims to disseminate these successful practices to other sites with similar equipment, thereby enhancing value across the organization.

Sustainability impact

Climate impact

As a company-wide program that aims to optimize energy usage among other things, VEP projects can have an additional benefit of reducing GHG Scope 1 and 2 emissions. In 2023, VEP projects that were implemented translated into annual GHG emissions savings of nearly 240,000 tons of carbon dioxide equivalent (CO2e) and annual energy savings of nearly 4 million GJ for a total investment of $7 million in operating expenses and capital expenditures.

Source: LYB Sustainability Report 2023 (SR 2023), p. 8

Business impact

Benefits

The program has delivered a run rate of over $400 million in recurring annual EBITDA and aims to reach $1 billion by 2025.

Costs

Capital Expenditures (CAPEX): The costs associated with individual ideas are effectively offset by the recurring savings they generate in EBITDA. While in some cases there is an initial investment required to implement the necessary upgrades and improvements, these costs are quickly recovered through the energy savings and operational efficiencies that result from the program.

Additionally, any potential subsidies or incentives can further reduce the upfront costs, enhancing the overall financial viability of the program. By focusing on projects that deliver both cost savings and sustainability benefits, the initiative minimizes trade-offs and maximizes long-term value for the company.

Impact beyond sustainability and business

Co-benefits

VEP is strategically designed to deliver dual benefits, both in terms of cost savings and sustainability. Beyond reducing operational costs through energy efficiency and other improvements, the initiative contributes to reducing LYB’s greenhouse gas emissions and environmental impact.

Potential side-effects

Potential risks include the high initial investment costs and the need for ongoing technological innovation.

Typical business profile

The program is relevant for large-scale (chemical) manufacturing businesses looking to achieve the dual goals of value creation and continuously finding solutions to integrate sustainability into their operations.

Approach

This initiative can be implemented through a structured, multi-phase approach that ensures systematic execution and maximizes impact:

1. Identification and ideation: The process begins at the site level, where engineers identify potential efficiency improvements or innovations based on their intimate knowledge of operations. These ideas are then documented and prioritized based on their potential impact on energy savings and emissions reduction.

2. Resource allocation and planning: Once ideas are prioritized, resources are allocated to the most promising projects. This includes financial resources, technical expertise, and project management support. Detailed planning is undertaken to outline the steps needed for implementation, including timelines, milestones, and key performance indicators (KPIs).

3. Pilot and testing: For innovative or complex ideas, a pilot phase may be conducted at a single site or a smaller scale to test the feasibility and effectiveness of the proposed solution. Data from the pilot is collected and analyzed to make necessary adjustments before full-scale implementation.

4. Full-scale implementation: Successful pilots are then scaled up across applicable sites. The implementation process is carefully managed to ensure consistency and to mitigate any potential operational disruptions. Project management tools are used to track progress and address any issues that arise during implementation.

5. Monitoring and continuous improvement: Post-implementation, the initiative is closely monitored to assess its performance against the established KPIs. Continuous feedback is encouraged to identify areas for further improvement. Successful initiatives are documented and shared across other sites to replicate the benefits company-wide.

6. Knowledge sharing and expansion: The Center of Excellence plays a crucial role in propagating successful initiatives to other sites with similar equipment or operational contexts. Regular forums, workshops, and internal communications ensure that knowledge and best practices are shared across the organization, fostering a culture of continuous improvement.

Stakeholders involved

A key driving force is LYB site engineers who often have energy saving ideas because they know the machinery inside and out.

The LYB CoE then provides the project management support to scale individual successful initiatives across sites.

The entire program has backing from the highest levels of management in LYB.

Key parameters to consider

One of the critical parameters for the success of this initiative is the role of site engineers. Engineers are pivotal in identifying and implementing innovative ideas to improve efficiency and reduce emissions. Supporting them effectively is essential to ensure both climate action and recurring value in the form of EBITDA is created.

Support issued by the LYB CoE may include providing the necessary resources and later using project management tools to scale ideas across sites. By empowering site engineers, the initiative can leverage their on-the-ground expertise and drive significant improvements across operations.

In the company’s experience, it took around 12 weeks from the ideation phase to have a bankable plan and a further eight weeks for preparation and onboarding.

Implementation and operations tips

VEP is an ongoing program focused on continuously implementing and sharing new ideas across sites. One of the main challenges is ensuring consistent communication and collaboration among different sites to facilitate the sharing of best practices and innovations. Overcoming this challenge requires a robust system for tracking and disseminating successful projects, as well as regular inter-site meetings or forums to encourage the exchange of ideas.

To ensure success and drive wide-scale adoption, it is crucial to establish clear processes for identifying, prioritizing and resourcing new ideas. Providing ongoing training and support for site engineers can also help maintain momentum and encourage continuous improvement.

For long-term success, it is important to create a culture of innovation where new ideas are encouraged and recognized. Additionally, implementing a feedback loop where sites can report back on the success and challenges of adopted initiatives will help refine and optimize the program over time.