2021 AFPM Annual Meeting Digital Edition: Executive Leadership Panel
MIKE RHODES, Managing Editor, Hydrocarbon Processing
2020 was a year of unprecedented challenges ranging from a global pandemic to extreme weather events, historic market volatility, social unrest throughout the nation and a highly unpredictable regulatory environment.
In the face of extraordinary events, the refining, petrochemical and midstream industries never fail to demonstrate their resiliency. Monday morning of the 2021 AFPM Annual Meeting featured an Executive Leadership Panel with industry leaders as they shared their thoughts on the challenges and opportunities the refining and petrochemicals industries have encountered over the last year, as well as their outlooks on the future.
The panel discussion was moderated by Chet Thompson, President and CEO, AFPM, and featured: Mike Jennings, President and CEO, HollyFrontier Corporation; Torkel Rhenman, Executive Vice President, LyondellBasell Industries; Bob Herman, Executive Vice President, Refining, Phillips 66; and Willie Chiang, Chairman and CEO, Plains All American Pipeline, LP.
After acknowledging that the last year had been extremely challenging, particularly for the midstream and downstream segments, Thompson began the discussion by asking the panel to provide their number one lesson learned.
Jennings stated, “Looking back over the last 12 months, the greatest challenge has been keeping our people safe and allowing them to work. We have experience with this as an industry—safety is a key pillar and the most important, obviously—and we have experience with planned outages along the Gulf Coast. The big takeaway has been the challenge of how to keep the people and the community safe, which we’ve been doing successfully now for 14 months.”
Monday morning’s Executive Leadership Panel featured (left to right): Mike Jennings, President and CEO, HollyFrontier Corporation; Torkel Rhenman, Executive Vice President, LyondellBasell Industries; Bob Herman, Executive Vice President, Refining, Phillips 66; and Willie Chiang, Chairman and CEO, Plains All American Pipeline, LP.
“I’ve been amazed at how resilient our industry has been through the two unprecedented events (the COVID-19 pandemic and that no one could have forecast,” Rhenman added. “Our industry has come out very strong and I’m optimistic about the future. A lot of the core values that we have as an industry—safety, environmental stewardship, health, etc.—have really helped us to manage these crises. Often, when you go through a crisis, your focus is so much on getting through it, managing it well, keeping your employees safe and maintaining your customer service, etc. But you can’t forget about your long-term strategy. You have to keep developing your people: looking back, we did more leadership development than ever before because we put a special focus on it.”
Rhenman said that while you can never know when a crisis might come, you can know that it will come. He stressed the importance of a strong balance sheet going into a crisis, adding that it provides options to take advantage of a crisis and make moves that will benefit the future business.
“It is a reinforcement of how resilient our industry is,” said Herman. “We kept people safe, working and healthy, and we did it in a myriad of ways. What works in one facility doesn’t always translate to another. The ability of our people to adjust to the conditions of their local site and make things happen in short order was, to me, nothing short of amazing. That translates to everything we do. I couldn’t be more proud of the way our industry has responded to the difficulties and challenges of the last 14 months.”
The panel agreed that when AFPM finishes gathering its complete statistics of 2020, the industry will have had its best year from a safety standpoint, despite all the distractions and challenges.
Chiang commented, “I think our challenge is how we talk about the benefits of energy in the U.S. and the world.” Chiang said that he was excited to be able to bring Plains All American Pipeline’s midstream experience to AFPM and expand his company’s insight and reinforce the views of different sectors. “We’re really all in this together. Probably the biggest thing we saw was what happens when the value chain in the energy sector becomes disrupted. We take a lot for granted on the freedom of movement piece on energy. How do we help facilitate energy to the rest of the world? I think one thing we should take away from this event is how do we talk more about the benefits of energy to all the key players, including regulators and politicians.”
Changing methodologies. Thompson posed the question of how companies anticipate such crises and how to “scenario-plan” for any such future events. “Hindsight is always 20/20,” Chiang said. “Torkell (Rhenman) mentioned balance sheet, which is key. We may think about it differently from a midstream perspective. The midstream strategy is to stay ahead of the producers and our customers on the downstream side to be able to have infrastructure to move energy from point A to point B. The upstream sector has grown incredibly with the shale revolution and the ability to bring 6 MMbpd–7 MMbpd of oil to production in the U.S. has been astronomical. The upstream and midstream sectors have been in what I call ‘pure growth mode’: lots of building, acquisitions and spending a lot of capital. This last year has reinforced a reset: getting back to efficiency mode rather than growth mode—the downstream has been focusing on this for some time.”
Thompson next asked the panel what their companies had to do during the last year to optimize operations and production and remain open during this period.
Rhenman answered, “We may forget that when the lockdown first happened, we didn’t know what would happen inside our facilities with regard to the spread of the disease. Again, the core values that the industry has on health, safety and environment really helped us in terms of crisis management, making sure that we followed all of the guidance and keeping our facilities running. I haven’t heard of any member company where the disease spread within the facility, so that’s a good recognition for us as an industry.”
The panel also acknowledged the personnel that took their work and continued operations from home, virtually overnight. It seems obvious that this is what would happen, but it was a great unknown and it took special efforts and altered processes to keep things operating.
Polar vortex. Thompson turned the panel’s focus to the recent polar vortex that struck Texas, Oklahoma and much of the Gulf Coast area. He asked the panel to discuss lessons learned and adjustments that needed to be made going forward.
“I think it’s important for us not to overreact to a 100-year or 150-year event,” Herman said. “Plant by plant, you will always find things you wish you could have done better. I think it really illuminated how interdependent we all are. The entire grid was suffering the same effects at the same time, and it had secondary effects, as well. It was a big learning experience about the supply chain. Communications, particularly with suppliers, were seriously hindered. The plants reacted well, but it was the infrastructure around us that took us to a new level.”
“The impact in Oklahoma was more around the deliverability of natural gas,” Jennings said. “Our industry is a huge consumer of gas, both as a feedstock and for heat. The variability and unpredictability of supply and the terms and conditions under which we are supplied are things we had never dealt with to that level—deliveries were reduced by 75% on certain days. We will need to harden the infrastructure, as well.”
Sustainable future. Thompson turned the panel toward a key theme across the industry and the AFPM Annual Meeting—sustainability. He asked where they thought the biggest opportunities were for improvement.
Herman said, “To me, the whole term ‘sustainability’ has been corrupted. It seems to now mean that you’re green or not green. The whole idea that we are the enemy in terms of sustainability is something where the narrative has been taken away from us, and we need to take it back. We’ve been powering better things for 130 years through hydrocarbons and petrochemicals. If you want to make us the enemy and take that away for the next 130 years, you won’t see the same progress and the same number of people coming out of poverty and reaching a sustainable lifestyle. Take all the medical devices that are made from plastic and see how sustainable life is. That’s our opportunity.”
“We have discussions with stakeholders about whether or not to build a pipeline,” Chiang said. “The other options are rail or truck. I think pipelines are the safest, most reliable and least impactful (in many cases) way to move product. To meet the global population needs, we need efficiency and conservation, which we are not as good as here in North America—we have 300 MM people in the U.S. using liquid energy, and 3 B in China and India combined using roughly the same amount of liquid energy. We need to get more efficient. Hydrocarbons are going to continue to be the feedstocks for petrochemicals.”
“It has become a much more important topic for investors today,” said Rhenman. “They also see it as an opportunity for the future: what we are doing and how they can capture growth from it. We need to address the waste of plastics and recycling, but we see it as an opportunity for investment.”
Outlook. As he closed the panel, Thompson asked the panel for their outlook for the near term, and what they expect the industry to look like in five years.
“I believe we’ve turned the corner, and vaccinations are going to be key to true recovery. We’re going to have fits and starts across the globe, but we’ll get there. Our fuels will do a lot to get us there and beyond. We will clearly have challenges that we need to innovate through and lean into in terms of sustainability and, particularly, emissions,” said Jennings.
Rhenman said, “I’m optimistic. I think it’s important to balance the focus on threats and opportunities. I think this has pulled us together as an industry to make it happen.”
Herman said that he is very optimistic heading into the back half of the year. “There is a lot of pent up demand out there, and you’re starting to see the fear leave the population. They are going to burn the products we make. We will continue to adapt despite all the challenges. At the end of the day, the world needs what we do, and that will sustain us to stay together and push the narrative of how important we are to modern life.”
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