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Selection of the most Suitable Life Extension Strategy for Ageing Offshore Assets using a Life-Cycle Cost-Benefit Analysis Approach

Animah, Isaac, Shafiee, Mahmood, Simms, Nigel, Erkoyuncu, John Ahmet, Maiti, Jhareswar (2018) Selection of the most Suitable Life Extension Strategy for Ageing Offshore Assets using a Life-Cycle Cost-Benefit Analysis Approach. Journal of Quality in Maintenance Engineering, 24 (3). pp. 311-330. ISSN 1355-2511. (doi:10.1108/JQME-09-2016-0041) (Access to this publication is currently restricted. You may be able to access a copy if URLs are provided) (KAR id:79741)

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https://doi.org/10.1108/JQME-09-2016-0041

Abstract

Purpose: A substantial number of production assets in the offshore oil and gas industry are facing operation beyond their anticipated design life, thus necessitating a service life extension program in the future. Selection of the most suitable strategy among a wide range of potential options to extend the lifetime of equipment (e.g. re-using, reconditioning, remanufacturing, refurbishing and adding on safety/process control measures) remains a challenging task that involves several technical, economic and organizational complexities. In order to tackle this challenge, it is crucial to develop analytical tools and methods capable of evaluating and prioritizing end-of-life strategies with respect to their associated costs and quantifiable benefits. The paper aims to discuss these issues. Design/methodology/approach: This paper presents a life-cycle cost-benefit analysis approach to identify the most suitable life extension strategy for ageing offshore assets by taking into account all the capital, installation, operational, maintenance and risk expenditures during the extended phase of operation. The potential of the proposed methodology is demonstrated through a case study involving a three-phase separator vessel which was constructed in the mid-1970s. Findings: The results from the application case indicate that the capital expenditure (CapEx) accounts for the largest portion of life cycle cost for the replacement strategy, while risk expenditure (RiskEx) is the major contributor to costs associated with life extension. A sensitivity analysis is also conducted to identify factors having the greatest impact on the optimum life extension solution, including oil price, production rate and money interest rate. Practical implications: In the past, the decisions about life extension or replacement of in-service equipment were often made in a qualitative way based on experience and judgment of engineers and inspectors. This study presents a “quantitative” framework to evaluate and compare the costs, benefits and risks associated with life extension strategies and subsequently to select the best strategy based on benefit/cost ratios. Originality/value: To the best of authors’ knowledge, no studies before have applied life cycle assessment and cost-benefit analysis methods to prioritize the potential life extension strategies in the oil and gas industry sector. The proposed approach not only assists decision makers in selecting the most suitable life extension strategy but also helps duty holders reduce the costs corresponding to life extension execution.

Item Type: Article
DOI/Identification number: 10.1108/JQME-09-2016-0041
Uncontrolled keywords: Life cycle assessment; Cost-benefit analysis; Capital expenditure; Life extension; Offshore assets; Risk expenditure
Subjects: T Technology > TJ Mechanical engineering and machinery
V Naval Science > VM Naval architecture. Shipbuilding. Marine engineering
Divisions: Faculties > Sciences > School of Engineering and Digital Arts
Depositing User: Mahmood Shafiee
Date Deposited: 23 Jan 2020 19:39 UTC
Last Modified: 24 Jan 2020 18:49 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/79741 (The current URI for this page, for reference purposes)
Shafiee, Mahmood: https://orcid.org/0000-0002-6122-5719
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