Benefits of Oil Mist

Executive Summary

2
Obstacles to Selling Oil Mist
• “We don’t have any money” is usually not true
• Regulatory and technical obstacles can be overcome with the facts
• The main competition to Colfax Fluid Handling is “customers who do nothing”
• Customers must feel negative consequences of “do nothing”
• Falling behind competitors
• Need to reduce manpower requirements
• No other lubrication method can produce equivalent results
• Every month without Oil Mist is another month of higher operating costs
• Oil Mist helps to solve these problems

4
Plant Organizational Structure
Benefits of Oil Mist Throughout the Plant Organization
Plant Manager
• Saves money – reduces equipment Life Cycle Cost
• Eliminates failures—improves availability
• Reduces manpower requirements
Financial Planning
• Turnkey project—predictable project cost
Business Planning
• Eliminates failures—improved availability
• Console is reliable and redundant
Environmental
• Eliminating failure reduces potential environmental
incidents
• Reduced oil usage means reduced disposal
requirements
• Not VOC
• Not EPA regulated
Health & Safety
• Eliminating failures reduces potential safety
incidents
• Mist is not flammable
• Mist is not dangerous to workers
• Mist is not regulated by OSHA
5
Engineering
• Improves reliability
• Console is reliable, redundant, and has built-in
safeguards
Maintenance
• Eliminates failures
• Lubrication issues significantly reduced
• Reduced burden for oil samples and analysis
• For the Maintenance Manager: reduced manpower
requirements because there are fewer failures
Reliability
• Eliminate failures, increase MTBR for an entire
population – reduces life cycle cost
• Superior lubrication practice (industry best practice)
• Console is reliable and redundant
Operations
• Simplified Operator rounds
• Increased availability
• Fewer process upsets
• Console is reliable, redundant, and has built-in
safeguards (alarm to control room, local alarm, visual
gauges)
• Generator only requires oil and air to make mist
Organization Structure: Key Points
• Focus on the benefits of Oil Mist specific to the department you
are talking to (previous slide)
• Find out who the people are who need to approve the project
• Understand that motivating factors and concerns vary from one
department to another
• Understand who the sponsor is and where that person fits into
the organization
• Work toward building support at the management level

6
Justification
• Justification is best used to help an internal sponsor “sell” Oil Mist to his organization
• Total installed cost of Oil Mist is greater than Colfax Fluid Handling proposal total
• Keep credits simple: MTBR, availability, manpower, life cycle costs
• Customers sometimes are unclear about repair costs, make sure they account for all
the steps
• Other credits can be shown as ancillary benefits, which offset new costs

Oil Mist is the only

technology that
improves
equipment
reliability across the
plant – not just on
one (1) piece of
equipment

7
Funding Process
• Large Oil Mist installations require capital funds, which Maintenance and Reliability personnel
may not use on a regular basis
• Know where the customer is in the funding process: Have they written the Approval for
Expenditure (AFE)?
• Make sure the sponsor is addressing the business benefits of Oil Mist in addition to the
improved lubrication and project credits
• Make sure that sponsors or allies in management are involved in selling the funding request to
the organization

8
Presentation to Management
• By the time the Oil Mist project is in an AFE presentation, it should already be sold
• The presentation should be as simple as possible so no one gets the impression it is complex or
asks questions that detract from the benefits

9
Why Every Plant Needs Oil Mist
• Oil Mist is essential to reach the top tier in plant reliability (10-12 years MTBR)
• Oil Mist reduces manpower requirements (or redirects them to other tasks) for an industry that
must do more with an aging and retiring workforce
• Oil Mist improves reliability on an entire population as soon as it is installed—“like flipping a
switch”
• No other lubrication method can deliver the same results

Oil Mist
lowers the
overall Life
Cycle Cost of
Rotating
Equipment

10
 The Three Keys to Capital Projects
How does an idea become a funded capital project?

11
Overview
• What is a capital project?
• What is the funding process?
• Who are you competing against?
• What are the 3 requirements that lead to
your capital project being funded?

12
Capital vs. Expense Budgets
Oil Mist requires money from the capital budget
Capital Budget
• New construction
• Investments/improvements
• Not often used by Reliability personnel
Expense Budget
• Repairs
• Replacements
• Reliability/maintenance projects
Operating
• Power
• Feedstock

13
 The Pathway
Typical steps in capital project funding

Sales Budget Enter Write

Budget Purchase
Lead Quote AFE
Item Order

Funded
Idea
Project

Proactive
Generation Sales Cost/Savings Detailed Cost Present to
of Need in Pitch Estimate Justification Management
Plant

Detailed CFH
Proposal

14
What Does “In the Budget” Mean?
The budget is only a spending plan, not a commitment

• No commitment
• Money in the budget is only a wish list
• Budget total only reserved for “reliability
improvements”
• Still requires funding approval
Oil Mist Orders
can Happen
without being
“Budgeted”,
but are less
Probable

15
Bumps in the Road
What prevents customers from continuing the
process through to a purchase order?

• Financial challenges
• Technical challenges
• Other plant project competition
The
customer
will place
obstacles in
the path

16
Financial Obstacles
The easiest excuse to avoid a project is to say you don’t
have any money

• It’s not in the budget

• It’s in the budget for next year
• We can’t justify it
• We only fund projects that pay out in 6
months Return On
Investment
is a
Powerful
Tool

17
Financial Obstacles
Customers Without Money
Customer Cash On Hand
ExxonMobil $29.2 Billion

ChevronTexaco $11.0 Billion

Marathon Oil $1.04 Billion

ConocoPhillips $2.80 Billion

Valero $737 Million

Tesoro $657 Million

Alon USA $200 Million

Source: www.finance.yahoo.com

18
Technical Obstacles
If the customer doesn’t believe the technical story, there are
a thousand excuses
• We just want to try it on one pump
• Oil mist can cause a fire
• Loss of plant air will fail all the pumps in the unit
• We do a good job of changing oil

19
Colfax Fluid Handling Input

What excuses do your customers

give for not buying?

20
Who or What Is The Competition?
What do customers do when they don’t install Colfax Fluid Handling Oil
Mist systems

• Buy from Another Vendor?

• Improve Lube Routes / More Oil Changes?
• Oil Safe Cans?
• Oil Analysis Programs?
• Synthetic Oil?

21
 COMPETITOR #1: Customers Who Do Nothing
Inaction on the part of customers
is major competition for Oil Mist

“Of course I’d

like to install oil
We MUST proactively identify and mist, but you
generate oil mist opportunities in know, all we do
plants is push papers
and have
meetings…

22
COMPETITOR #2: Other Capital Projects

Customers always have the choice to use the money for another project

A New Pump A New Compressor Oil Mist

23
How do you get the customer to select
Colfax Fluid Handling?

Create compelling business

case which create value inside
the plant

24
The Three Magic Ingredients
If your customer believes 3 things, a purchase order is on the way…
1. Project is a good technical solution
2. Project is a good investment
3. Project addresses an important or urgent business need

What prods
your
customers
into action?

25
The Missing Ingredient
You must address an important business need…

The Problems
• Strategic: falling behind the competition
• Technical: current lube doesn’t cut it
• Financial: continuous loss due to
equipment failures
• Personnel: Do more with less
• MTBR vs Other “sister” plants is poor
Consequences
The Solution
• Colfax Fluid Handling Oil Mist
result from
business as
usual

26
Key Points: The Funding Process
• The budget is a spending plan, not a
commitment
• The initial proposal can be a differentiator –
we must be thoughtful and thorough to
provide clear indication that the project
would be handled well
• Make sure the customer believes the 3
keys to keep moving forward

27
Key Points: Three Keys Keep the Funding Process
Moving
• Customer must believe Oil Mist is
technically sound
• Customer must believe Oil Mist is a good
financial decision
• Customer must see Oil Mist as solution to
an immediate or important need

28
 Economic Justification
How customers look at cost vs. savings

29
Objectives/Overview
• Recognize the total installed cost
• Build the credits for the project
• Equipment repairs
• Availability
• Energy
• Manpower
• Present results in financial terms

30
Sample Project at Typical Refinery
• Large refinery unit
• Product value $15/bbl
• Process rate 60,000 bbl/day
• 100 pumps, 80 motors, 20 steam turbines
• Current pump MTBR 3 years

31
Total Cost of Project
• Hardware (Colfax Fluid Handling quote)
• Installation (Colfax Fluid Handling quote)
• Project management
• Civil engineering and construction
• Electrical engineering and construction
• Machinery modifications
• Training The customer
• Contingencies
needs to add
all the costs

32
Sample Project Cost

Hardware: $250,000
Installation: $200,000
Project Manager: $ 25,000
Civil: $ 10,000
Electrical: $ 20,000
Machinists: $ 20,000
Contingency (10%): $ 55,000

Total Cost: $580,000

33
Credits
• Increased MTBR
• Increased availability
• Reduced manpower
• Energy savings

34
MTBR Credit
• Establishing Actual Maintenance Costs
• Estimating MTBR Improvements

35
Customers Are Not Always Clear About Repair Cost
• Many customers believe their repair costs are far below industry
averages
• Understand how they establish the cost of a repair
• Make sure they account for all of the work required
• Help your customer find out what it really costs

“Our pump
repairs only
cost $2,000”

36
Typical API Pump Repair Cost
Task Hours $/Hour Hardware Total

Isolate 4 65 0 $260

Remove 8 65 0 $520

Disassemble/inspect 8 65 0 $520

Machining, welding 32 65 0 $2,080

Replace parts 16 65 $6,000 $7,040

Reassemble, test 16 65 0 $1,040

Install 16 65 0 $1,040

Return to service 4 65 0 $260

Total Cost $12,760*

Bloch & Geitner Machinery Failure Analysis and Troubleshooting, p699

37
Typical Refinery Motor Repair Cost
Task Hours $/Hour Hardware Total

Isolate 2 65 0 $130

Remove 2 65 0 $130

Clean/disass/inspect 8 65 0 $520

Replace parts 4 65 $2,000 $2,260

Dip/bake 8 65 0 $520

Reassemble, test 8 65 0 $520

Install 4 65 0 $260

Return to service 2 65 0 $130

Total Cost $4,470*

Bloch & Shamim, Oil Mist Lubrication p152

38
General Steam Turbine Repair Cost
Task Hours $/Hour Hardware Total
Isolate 8 65 0 $520

Remove 16 65 0 $1,040

Clean/disass/inspect 16 65 0 $1,040

Machining, welding 16 65 0 $1,040

Replace parts 8 65 $3,000 $3,520

Reassemble, test 40 65 0 $2,600

Install 16 65 0 $1,040

Return to service 8 65 0 $520

Total Cost $11,320*

Bloch & Shamim, Oil Mist Lubrication p152

39
Estimate MTBR Increase
Pumps
• Eliminate 80% of bearing failures
• Assume bearing failures 35% of pump failures
Motors
• Eliminate 90% of bearing failures
• Assume bearing failures 90% of all motor failures
Steam Turbines
• Eliminate 80% of bearing failures
• Assume bearing failures 75% of all failures

40
MTBR Credit
• Total credit $164,000/year Failures Cost per Savings
• 18 failures eliminated per Eliminated Repair
year
Pumps 9.3 $12,500 $117,000
• Pump MTBR increases
from 3 to 4.2 years for the Motors 6.5 $4,500 $28,000
entire population
Turbines 1.7 $11,000 $19,000

Total 18 $164,000

41
Process Downtime
• Equipment criticality
• Probability of process loss
• Cost of process
• Availability credit applied to population

Downtime is
money down
the tubes
Equipment Criticality
• Critical
• Unspared, failure causes unit shutdown or significant rate reduction
• Essential
• Spared, double failure causes unit shutdown or significant rate
reduction
• Process
• Spared, double failure causes minor rate reduction or process upset
• Utility
• Loss of service does not impact process

Which
equipment is
most
important?

43
Credit for Spared Service
Current MTBR = 3 Years
Future MTBR = 4.2 Years
Repair Lead Time = 10 Days
Cost of Production = $15/bbl
Production Rate = 60,000 bbl

Annual Risk = $6,980 (3 year MTBR)

Annual Risk = $3,780 (4.2 year MTBR)
Credit = $3,200 per service

44
Availability Credit
• Assume all spared services
• Availability credit = 50 * $3,200
• Availability credit = $160,000

Even with
spares
availability
adds up

45
Reduced Manpower Credit
• 180 Oil sumps
• Oil changes: 2 per year
• Oil fills/checks: 4 per month
• Time per sump: 4.5 hours/year
• Cost: $67/hour
• Manpower credit: $55,000/year

Operators no
longer have
to change oil
or regrease
motors

46
Energy Savings
• Total online HP = 5000 HP
• Cost of energy = $0.06/kwh
• Efficiency gain from Oil Mist = 1%
• Energy credit = $20,000/yr

Small
efficiency
gains result
in big
savings

47
Total Credits

MTBR: $170,000
Availability: $160,000
Manpower: $ 55,000
Energy: $ 20,000
Total Credits: $405,000

48
Subtract Ongoing Cost from Credits
• Additional instrument air
• Synthetic oil
• Power to Oil Mist console
• Annual maintenance
• Assume added costs = $20,000

There will be
some
additional
costs

49
Return On Investment
• $580,000 Project cost
• $385,000 Annual savings
• IRR: 48%
• NPV: $2.0MM (20 years)
• Payout: 25 months (after tax)

Operating
costs go
down
Justification: Key Points
• Justification is used to verify that Oil Mist is a sound financial decision
• It helps an internal sponsor “sell” oil mist to his organization
• Total installed cost of Oil Mist is greater than Colfax Fluid Handling proposal total
• Likewise, make sure customer provides full credits (full cost of equipment repair, real manpower
cost)
• Add it all up, and Oil Mist is a great investment

51
 The AFE (Authorization For
Expenditure)
Your customer cannot buy Oil Mist without one.

53
Elements of the AFE
The AFE helps management know that the money is being spent
wisely
• Purpose
• Scope of work
• Justification
• Alternatives
• Sensitivities
• Ancillary benefits How are you
• Operating cost impacts
• Technical risks going to
• Timing
spend the
money?

54
Purpose and Scope: General
Management wants to know where the money is going.

• What will the funds pay for?

• What is the scope of the project?
• What resources will be required?

What are
you buying
and why?

55
Purpose and Scope: Example
Oil mist lubrication for the crude unit

• Purpose: Improve reliability by installing Oil

Mist
• 200 pieces of rotating equipment
• Scope: includes hardware, installation, project
management, electrical and air connections,
and foundations

3 of these
and lots of
piping

56
Justification: General
Why is the project worth $580,000?

• Why is the project being pursued?

• What is the economic benefit?
• What is the benefit to the equipment?
• Why was this project selected?
• Why was the target unit selected?
“We need Oil
• Will it work? Mist because
our current
lubrication
does not form
carbonaceous
ball film”...

57
Justification: Example
Oil Mist improves reliability of population

• Oil Mist is an “Industry Best Practice”

technology, proven by leading companies
• Bearings run cooler and free of
contaminants
• Nearly all bearing failures eliminated
• Oil Mist selected because it impacts
population of equipment
• Specific unit selected due to low MTBR

Proven by leading companies

58
Justification: Example
Oil Mist saves money

• Project will save a total of $385,000

annually
• Pump MTBR Increases from 3 years to 4.2
years
• Unit availability increased
• Manpower directed at more productive
activities
The plant
• IRR = 48% will save
• NPV = $2.0 Million
• Payout = 25 months (after tax)
$385,000 per
year

59
Alternatives: General
What else would improve plant MTBR?

• What are the consequences of doing nothing?

• What else can be done to accomplish the same
objective?
• Why isn’t the money being spent somewhere else?
• What if the scope were expanded or reduced?

What are the

choices?

60
Alternatives: Example
Traditional lubrication methods will never produce the same results
as Oil Mist

• Continue using traditional lubrication

• Requires more resources and cannot provide the level of
reliability of Oil Mist
• Addressing “bad actors”
• Cannot impact populations
• Requires more resources and longer implementation “Can’t we
schedules
• Expand or reduce project scope just change
oil more
often?”

61
Sensitivities: General
What variables will impact the ROI?
• What economic assumptions have been made to
establish the credits?
• How certain are the savings?
• How much will the outcome change if certain
assumptions vary?

What
variables
affect the
outcome?

62
Sensitivities: Example
Oil Mist credits are based on sound assumptions

• Pump repair costs remain constant

• Product value $15/bbl
• MTBR improvement uses conservative
estimates
• Case history data would increase
savings by $150,000 with MTBR
increasing 5.9 years.
Savings are
accurate

63
Sensitivities: Example
Regulation and system failure have been evaluated

• Downside sensitivity: Oil Mist could

become regulated by EPA or OSHA
• EPA and OSHA have reviewed
• Organizations recognize overall
benefits
• Oil Mist is not a VOC
What will
• Downside sensitivity: Loss of Oil Mist cause us to
would cause pump failure or unit shutdown
• Unlikely due to 100% capacity in miss the
spare generator
• Alarms
target?
• 8 hour operation after failure

64
Ancillary Benefits
What benefits are not included in the credits?

• Fewer failures resulting in lower chance of safety or

environmental incidents
• Personnel can work on other problems
• Elimination of start-up failures
• Lower bearing temperatures resulting in elimination of
We can
cooling water from bearing housings work on the
• Reduced oil usage—reduced disposal
problems,
not the
failure of the
day
Operational Cost Impact
Will the system require utilities or changes to the process?

Positive impacts
• Reduced manpower
• Fewer failures, less downtime
• Possibility of eliminating cooling
water
• Reduced energy usage
Negative impacts
• Additional instrument air usage
• Increased cost of synthetic oil

66
Technical Risks
How certain is project success?
What has been done to mitigate the risks?

• Relatively simple system

• 40 years of industry experience
• Turnkey installation
• Training provided to Operations and Maintenance personnel
• 24-hour support
• Colfax Fluid Handling maintenance contract

67
Timeline
What are the milestones, when will the project be complete?

• August: Funding approved

• October: All hardware on site
• December: Project complete
• All work completed online, no turnaround
required

First the
money, then
the hardware

68
Conclusion
If the customer prepares an “air-tight” AFE, chances of
success are outstanding

• Oil Mist is simple compared to other reliability projects

• Doing nothing is a lousy alternative
• The ROI is great
• Success is certain
• No other project offers so many benefits to such a
large population
You’re now
cleared for
installation

69
 Why Every Plant Needs Oil Mist
The compelling and urgent business reasons for Oil Mist

71
Summary
“Process Industries are in a jam”, Oil Mist delivers benefits beyond
financial
Why:
• Competition from leaders
• Personnel limitations
• Technical merit

72
Leaders vs. Laggards
Leaders are approaching
Pump Reliability of U.S. Refineries
10 years between failures
120
• Leaders repair 130 pumps/year
100

MTBR (Months)
• Laggards repair 480 pumps/year
80
60
40
20
0
Leader Average Laggard
* Population 1,200 Pumps

Laggards rebuild pumps every day

73
Leaders vs. Laggards
Leader operates with greater profitability
• Leader spends $2,000,000/year
• Laggard spends $9,000,000/year The Cost of Poor Reliability

Annual Equipment Cost

$10,000,000
$9,000,000
$8,000,000
$7,000,000
$6,000,000
$5,000,000
$4,000,000
$3,000,000
$2,000,000
$1,000,000
$-
Leader Average Laggard
* Population 1,200 Pumps

Laggard spends $9 million on band-aids

74
Demographic Dilemma
Process plants will lose critical skills in the years ahead
• Aging workforce
• Loss of knowledge 60
• Reductions in skilled personnel
• Plants really need to “do more with less”

35

< 30 30-45 >45

Age of Maintenance Personnel
Personnel Advantages of Oil Mist
Oil Mist: a solution to plant personnel already stretched to the limit
• Turnkey project
• Limited site resources required
• No need for plant shut-down
• No turnaround resources needed
• Eliminates time-consuming labor
• No oil changes required
• Fewer pump repairs

77
Oil Mist: the best lubrication solution
No other method equals the performance

• Oil Mist addresses all causes of lubrication related bearing failure

• Contamination
• Incorrect level
• Incorrect lubricant
• Inadequate lubrication
• Nothing else eliminates the failures
• Inpro isolators do not
• Oil safe cans do not
• Trico oilers do not
• Better rounds and sampling do not
• Synthetics do not

78
Immediate Solution
Oil Mist improves reliability “like flipping a switch”
• Applied to entire population in one project
• No need for plant shut-down
• No need to overhaul equipment
• No other reliability improvement can be applied
to a population so easily

79
Population Effect
Improving the whole population with Oil Mist delivers big results

• Install Oil Mist on 1,000 pumps

• Approximate cost: $5,800,000
• Approximate savings: $2,300,000
• Time to implement: 3 years
• MTBR increases from 48 to 68 months

80
Alternative to the Population Approach
Solving “bad actors” is difficult and not enough to reach the top tier

• 25 bad actors: 2 failures per year

• Approximate cost: $3,750,000
• Approximate savings: $1,000,000
• Time to implement: 5 years
• Plant MTBR improves from 48 Months to 56
Months

81
More Difficult Alternatives
Changing longstanding practice is even more
difficult than solving bad actors
• Equipment repair standards
• Training on pump reliability
• Increased equipment monitoring

These options require:

• Additional manpower
• Site culture change
• Greater financial risk
• Long implementation schedule

82
Financial Benefit
Savings pile up with the population effect

• Large investment
• $500,000 project cost provides
leverage to company investment
• High return
• Typical IRR is 35% to 50%
• Limited risk
• Oil Mist works, proven with field
experience
• Repeatable from one plant to the next

83
Conclusion
Oil Mist is essential to reach the top tier

• Improves reliability like flipping a switch

• Reduces manpower required
• Delivers superior lubrication
• Population effect delivers powerful
reliability benefit
• Faster and easier than other reliability
improvements
• Great financial return

84