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"The Refinery of the Future"

Remarks by
Lance Gyorfi
Vice President, Refining
Chevron Products Company
As delivered at the Utah Petroleum Association
Salt Lake City, Utah
Sept. 10, 1998

Opening Remarks
This is a homecoming for me. As some of you know, I spent five years at Chevron's Salt
Lake Refinery, first as operations manager and then as refinery manager. So Im especially
pleased to be back this year, which marks the refinerys 50th year of operation. This
month, I, too, turned 50. And if nothing else, today I hope to convince you that the refining
industry and I both have our best years ahead of us.
But first, I'd like to pay a tribute to the past.
It was more than 100 years ago when Chevron began selling petroleum products here. In
those days, the company hauled oil in wooden wagons, and street lamps burned kerosene.
Farming and agriculture dominated the economy.
A major oil discovery in Rangely, Colo., in 1933, along with a growing petroleum market in the intermountain
West, led to construction of the Chevron refinery. It started in 1948 with a capacity of 17,000 barrels a day.
Pipelines now bring oil from Wyoming, Montana, Canada and Utah, as well as Colorado, and refining capacity
has tripled, yielding nearly 2 million gallons of products a day. And we spent $110 million in the early 1990s to
add a low-sulfur diesel plant and make other improvements.
The refinery has aged well, considering that in its first half-century it has processed 755 million barrels of oil
and has produced 14 billion gallons of gasoline, 9 billion gallons of diesel and 3 billion gallons of jet fuel.

Chevron and Salt Lake City

Chevron and Salt Lake City have grown and prospered together. We're proud to serve the region's consumers
and businesses. Our local payroll amounts to $20 million annually, with an additional $10 million a year spent
on contractors.
Salt Lake City has built a broad industrial base. To its credit, this city has always respected the old-timers while
welcoming new businesses. More than most places, it's striking a balance between business and the
environment. As a result, this is one of the strongest economies in the nation, with a growth rate twice the
national average. Here the term "quality of life" really means something. Salt Lake City just keeps getting better.
We in refining have gotten better too. And it's a good thing because we face an ever-changing environment that
tests our ability to adapt both our operations and our outlook.
What are the main factors reshaping refining? They are changes in transportation systems, the availability of a
wider range of raw materials, the blurring of boundaries between oil production and oil refining, and the everpressing need to better safeguard people and the environment.
I say "ever-pressing" for a reason. The business community here has worked hard to improve air quality, and
we've reached many of our goals, including reduction of ozone levels.

Alvarez Thomas 796, 3 C

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If you'll permit me this metaphor, a new cloud hangs over the valley. The Environmental Protection Agency has
established stricter standards for ozone and particulate matter, and these will be difficult to meet around the
Wasatch region.
The Clean Air Commission worked once and might be a good model to follow as you again decide how best to
encourage businesses to prosper while protecting the health of people and the environment.
All of us face serious short-term demands, such as cost-effectively meeting the new air quality standards. But it's
healthy to stand back once in a while, take a deep breath and see the vision beyond the business plan.

Vision for the Future

I'd like to give you a picture of the refinery of the future, a place where advanced technologies and highly skilled
workers will raise to new levels the standards for efficiency, safety and, yes, plant intelligence. In many ways,
refiners are taking the lead not just in meeting current challenges but in anticipating future ones.
Future refineries will meet society's transportation needs, regardless of how vehicles are powered. They also will
adapt to a changing slate of raw materials.
The current trend in fuels is toward cleaner-burning products with less sulfur. At the same time, we have to
prepare for vehicle technologies with new power requirements. Octane and additives, for example, are not
important for cars that run on fuel cells.
Crude oil has always been our basic raw material. Gas-to-liquids technology, however, starts with natural gas,
converts it to synthetic crude oil and, ultimately, transportation fuels. A number of gas-to-liquids plants are
being built around the world, including a Chevron facility in Nigeria.
Some future refineries will be tailored to transform synthetic crude into specialty fuels, chemicals and
lubricants. These facilities will be more like chemical plants, focusing on products with a higher value than
gasoline.
I don't worry about whether we can make the right products or work with different raw materials. We've proved
that we can keep pace with the market; we did it most recently in California, when in 1996 we began making
reformulated gasoline that meets exceedingly strict requirements. We spent $1 billion to upgrade our Richmond
and El Segundo refineries to make California reformulated gasoline. As part of that effort, we installed a
process-control system that actually has advanced the art of blending. Sophisticated instruments now measure
product specifications online and certify the gasoline as it's being blended. We no longer send it to a lab.
Today, I'm going to focus on changes that will make refineries viable no matter how vehicle technologies
evolve.

Borrowed Technologies
When I consider industry changes in my 28-year career, it's not huge leaps in refining technology that I think of
first. How we make fuels from crude oil essentially we distill, reform, transform and crack molecules
hasn't changed all that much. Some of the most significant changes have to do with technology from other
industries.
Let me first tell you about some changes already occurring that have bold implications for tomorrow's facilities
and underscore the importance of looking beyond our own industry.

To inspect a coke drum, a vessel 27 feet wide and 100 feet high that holds the residue of crude oil,
workers used to erect scaffolding all over the interior so they could feel the walls for bulges and cracks.
This inspection could take five people a week. Today, a laser camera that sends out several beams does
the job much more accurately in a couple of hours.

To inspect pipelines, we typically do spot checks with ultrasound equipment. At several Chevron
refineries, we've been testing magneto-strictive technology. It creates magnetic fields and sends a pulse

Alvarez Thomas 796, 3 C

1427 Buenos Aires, Argentina
Tel.: +54 1 555 5703,
Fax: +54 1 551 0751
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info@soteica.com.
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down the whole length of pipe. Every bit of pipe is checked, and the technology promises to save time
and money.

To measure gasoline octane, the common method is to take a sample from the refinery and send it to a
lab. You run the sample through a test engine, listen to the knock and take notes. Near-infrared sensors
can now measure octane on site. They detect down to the molecule the chemical composition of
solids, liquids and gases.

Smart Sensors
New sensors, based on computer chip technology, will have a profound effect on tomorrow's operations. The socalled "lab on a chip" will perform advanced chemical analyses online and in real time. We'll see more "smart
materials," materials with built-in sensors that continuously measure, among other things, temperature, stress
and strain. With this kind of help, we can predict maintenance needs, finding potential trouble spots and fixing
them before there's a problem. By isolating only the equipment that needs attention, we might avoid costly
shutdowns and, more important, avoid endangering people.
Most refinery sensors measure one characteristic at a single point. An optical sensor, on the other hand, records
many characteristics at every point along a fiber. Fiber optics have been tested in oil fields, and refinery
applications are soon to follow. The fiber is about the width of a horsehair and can be several miles long. It lets
us know what's happening in places we couldn't reach before. Fiber optics provide a broad range of real-time
data that will help us process at optimum levels, reduce costs and avoid system failures.
Refineries are becoming an amalgam of smart systems and integrated technologies, highbrow hardware that will
actually manage knowledge in the not-too-distant future. Hidden in the landscape of tanks and towers is a vast
library of information, a datascape that we are just beginning to take advantage of. In refineries, as in most
businesses, there's no shortage of data. What we need is information.

Microprocessing Power
Let's talk for a moment about computing power.
Remember IBM's "Deep Blue," the computer that humbled World Chess Champion Garry Kasparov last year? It
could analyze 200 million possible chess moves per second. Early this year, IBM announced a new computer
that can analyze 1 billion moves per second. And it is now developing a supercomputer that will be the fastest
ever would you believe 1 trillion calculations per second?
In 1979, an Intel computer chip consisted of 29 thousand transistors. The computer chip of the near future, as
early as next year, will have more than 20 million transistors. And Texas Instruments claims it will market a
chip with 400 million transistors in 2001. These increases in computing power are staggering. Some notions
unthinkable a few years ago are looking downright practical.
Smaller, cheaper and more powerful computer chips are opening up a wealth of new applications. Chips can be
embedded in cars, clothes, appliances and, conceivably, in every piece of refining equipment.
The refinery of the future will be like a dynamic computer network. Imagine a constellation of sensors, all tied
together, that delivers a clear, continuous picture of the whole refinery. Imagine all parts communicating with
each other. What will that let us do? It will allow us to continuously optimize performance of the whole refinery
in real time.

Changing Roles
No matter how automated we get, people will always be the most crucial factor in our work. But their roles will
change.

Alvarez Thomas 796, 3 C

1427 Buenos Aires, Argentina
Tel.: +54 1 555 5703,
Fax: +54 1 551 0751
e-mail: info@soteica
info@soteica.com.
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Refinery work is becoming a more highly skilled job. Increased automation will eliminate some positions. We'll
see fewer people out in the plant turning valves. The good news is that people will be freed up to focus on a
more interesting and critical task: How do I add value to the business?
Refinery employees must be computer literate, and their view must go well beyond the refinery gate so that
superior decisions are made at every point in the business. This is true today and will be even more of an
imperative tomorrow. Automation doesn't imply less need for human intelligence. Quite the contrary. Without
good engineers and operating technicians, automation might make us more prone to errors. It's people who are
changing the industry culture and who see the value of sharing best practices, managing knowledge and
removing barriers.

A Broader View
I mentioned that refiners must take a broader view of the business than in the past. This might prove trickier
than keeping up with technology. Over several decades, refining has gone from being a cog in the wheel of an
integrated oil company to being a truly competitive segment of the industry. But the shift in mindset isn't over.
To come up with new and better solutions, we must continuously challenge ourselves to think creatively. We
can't just look at our own department, refinery or industry.
We're learning about automation from the steel and auto industries. Within the petroleum business, upstream
(the exploration and production side) and downstream (the refining and marketing side) often act like different
industries. But these groups now are learning to collaborate for better business results.

Doing the Unimaginable

Another exciting change involves moving refinery processing to the oil fields; while it's a startling concept now,
it was unimagined just a few years ago.
It's now possible to produce oil while leaving behind the asphaltenes, those undesirable components that
ordinarily are separated in a coker. Maybe, just maybe, we can do away with billions of dollars worth of cokers
and never need to build new ones. Besides reducing costs, this would cut wastes and energy use.
Also on the horizon is a way to extract sulfur from oil below ground. This increases the value of crude before it's
produced and, again, eliminates a step in refining. It also opens up more markets for the oil. Think about what
that means. If downstream processes move upstream, refineries will need less hardware, manufacturing will
become simpler, and potential safety hazards will be fewer. In effect, this shrinks the size and complexity of the
refinery with no loss of output.

Artificial Intelligence
A 1996 study by Cambridge Energy Research Associates stated that information technology has enabled the oil
and gas industry to flourish since the 1986 price collapse. Oil-field visualization and simulation, for example,
have allowed companies to find and develop reserves that were previously undetectable or too costly to pursue.
Refining also is benefiting from advances in information technology along with the advent of sophisticated
sensors. This coupling of technologies will yield more useful information. It also will allow us to run
computational models that aid in decision making. In fact, the refinery itself will make some of those decisions.
Automation is evolving from a system that measures and collects data to one that makes logical decisions and
learns from experience.
Some plants have adopted "fuzzy logic," that is, using computer programs that choose a course of action among
alternatives. Automatic cameras, for example, use fuzzy logic to choose lens aperture and shutter speed.
Even more advanced are neural networks that recognize patterns, learn from situations and adapt appropriately.
Chevron's St. James, La., chemical plant uses a neural network to accurately predict the purity of styrene. The

Alvarez Thomas 796, 3 C

1427 Buenos Aires, Argentina
Tel.: +54 1 555 5703,
Fax: +54 1 551 0751
e-mail: info@soteica
info@soteica.com.
soteica .com.ar
.com.ar
home page: http://www.soteica
http://www.soteica.com.
soteica .com.ar
.com.ar

St. James plant has also invested in Web technology. Its Internet site provides a continuous view of real-time
process and lab data.
Yesterday's database is becoming today's information base and tomorrow's knowledge base. The world of
artificial intelligence has quietly arrived at refining's front door.

Closing Comments
In many ways, we're in the business of being invisible. Success means people realize the benefit of our products
but never see them, aren't aware of our operations and don't get annoyed that we're nearby.
We've made huge investments to manufacture products that help improve the quality of life. And we've kept
prices low. According to the American Petroleum Institute, the average gasoline price (in inflation-adjusted
1997 dollars) earlier this year was the lowest in the 79-year history of recorded pump prices. That's an amazing
fact.
The refining revolution I'm talking about involves both technology and the changing roles of people, and it will
let us do even more amazing things. It will give us greater control than ever before. That means better products,
more efficient operations and safer facilities.
I can see the day when, aside from our manufacturing expertise, we will be known for solving problems, setting
product quality and environmental standards, and topping the list of forward-looking industries. We might not
have invented all the technology that will shape the refinery of the future, but we will be experts in using it to
our advantage and for the good of the communities around us.
Thank you very much.