Total cost of ownership, oil and gas, petrochemical

Guide to reduce the Total Cost of Ownership in the Oil & Energy and Petrochemical Industry.

The total cost of ownership of an asset/analyzer is more than its production cost. Instead, it is the sum of the cost for designing, manufacturing, maintaining, running, and finally disposing of reusing the product. The total cost of ownership is more than the production cost of an asset/analyzer, but it provides a more accurate estimate of the Return of Investment, ROI.

Major energy companies must lower their TCO to increase their profits. The TCO can be calculated at different models and vary depending on equipment or industry. Therefore, your company needs to define the TCO model and the relevant cost elements when specifying the TCO requirements and targets for the asset/analyzer.

Life Cycle Cost Analysis

A life cycle cost analysis (LCCA) evaluates various financial inputs over the life of an asset/analyzer to determine the most cost-effective option or to calculate the estimated total cost of an asset.

When an organization wants to conduct an LCCA is the scope significant. Generally, the different financial inputs include:

  1. Designing
  2. Manufacturing
  3. Installation
  4. Maintenance
  5. Operating
  6. Depreciation
  7. Decommissioning
  8. Resale or disposal.


Asset Life Extension

As industries increasingly strive to reduce operational costs, extending the life of aging assets is critical for reducing the total cost of ownership. While asset life extension won’t decrease the TCO for an individual asset, it will lower costs for asset lines.

However, asset life extension with its challenges. Maintaining integrity becomes increasingly challenging as assets age and requires a clear process. It is crucial to plan and implement measures to maintain and monitor aging equipment to preserve cost benefits while reducing potential risks.

Optimizing maintenance routines

Ongoing maintenance can comprise a large percentage of an asset’s total cost of ownership, and as organizations push to extend the life of equipment, optimizing maintenance will be crucial. Using an asset management system, like Hint’s AML Information Management, can reduce maintenance costs. Another option to reduce the total cost of ownership is by Reliability Centered Maintenance, RCM.

Reliability-centered maintenance is an asset maintenance development and optimization methodology focused on maximizing availability and efficiency while reducing maintenance cost and total cost of ownership. There are three ways to realize this:

  1. Increase equipment availability: Target critical assets with maintenance strategies to minimize downtime. Preventative maintenance of predictive maintenance is used as part of an overall strategy to increase equipment availability; AML-AMADAS will fit perfectly to achieve this.
  2. Greater maintenance efficiencies: With failure modes categorized during the analysis phase of a RCM assessment, operators can quickly diagnose equipment failure – leading to less time for each repair. This reduces routine maintenance workload by reducing the number of tasks and lengthening intervals between tasks.
  3. Cut costs with targeted and flexible strategies: The efficiency will increase by using flexible maintenance strategies. This technique combines reactive, proactive, predictive, and condition-based maintenance using one approach depending on asset criticality or failure modes. This technique will perfectly fit in AML Information Management because you can choose your own KPIs based on the critical assets in your plant.


Total Cost of Ownership (TCO) – Benefits

To get better results and the end of the year is more achievable by reducing your costs than making more revenue. Because many companies do not want to invest due to uncertain time, conducting life cycle cost analysis, increasing asset life extension, and optimizing maintenance are important tools organizations should implement to better control their Total Cost of Ownership. In that way, there is less stress and the end of the year and more joy through increased profits.