© The Woodhouse Partnership Ltd 2009 1

Asset Life Cycle Management

In a PAS 55 Environment

Alex Thomson MSc CEng MIET

The Woodhouse Partnership Ltd
www.twpl.com

© The Woodhouse Partnership Ltd 2009 2

 Elements of Asset Life Cycle Management
‘Sweating’ them

Investing in them

Disposing
Maintaining them
of them

© The Woodhouse Partnership Ltd 2009 3

 “What is Asset Management”?
Financial service managers:
Portfolio management of cash, shares, bonds & futures
Main board directors:
Mergers/acquisitions of whole companies and their ‘assets’
Maintenance staff:
A smarter name for maintenance that adds credibility
Software vendors:
Asset information databases and work management aids
IT managers:
Labelling the PC’s & peripherals and keeping track of them

Complex System, Plant & Infrastructure managers:

Optimising the whole life mix of asset investment, use, care & disposal

© The Woodhouse Partnership Ltd 2009 4

 History – oil industry
• N.Sea oil started 1975
• Political aim for self-sufficiency by 1980
• Typical exploration & prod’n costs $15/bbl
• Market value average $35/bbl
• Price crash 1986 (to $9/bbl)
• Piper Alpha disaster (167 killed)
• Lord Cullen report on self-regulation
• Diminishing reserves, marginal fields
• Globalisation of marketplace

© The Woodhouse Partnership Ltd 2009 5

 AM processes
Capital Investment,
Design & Projects Operating & Materials
Maintenance
Strategies RESOURCE
CHANGE ADMIN
Mgmt

$$
$$
$£
££
Labour
£ £ £ £
Resource PLANNING
EVALUATION & Work DEFINITION
of Solutions

Problem/Opp’ty Inspection
INVESTIGATION CONTINUOUS & CBM Work programme
IMPROVEMENT SCHEDULING
cycle
WORK
ADMIN
Data Collection
Problem/Opp’ty Preventive, Detective
IDENTIFICATION & Corrective WORK
External
reporting

© The Woodhouse Partnership Ltd 2009 6

 ‘Levels’ of Asset Management
Asset Management
= buying &
Group/ selling companies
Corporate Mgmt

Portfolio/whole network AM Asset Management

= maximising whole life
return on investments
Business unit/system/region AM

Equipment AM AM often seen as

Asset Asset Asset Asset just ‘maintenance’
creation exploitation care disposal (asset care)

© The Woodhouse Partnership Ltd 2009 7

 Managing the levels in an integrated, optimized way

Typical priorities & concerns

Corporate/
Organizational Strategic Goals Organization
Management
PAS 55 Asset
Capital investment optimization Management
and sustainability planning Manage Asset Portfolio
System

Sustained
System performance,
performance, Manage Asset Systems
cost & risk optimization

Optimize Manage
life cycle Create Assets Renew
activities Utilize Maintain
/Acquire /Dispose

© The Woodhouse Partnership Ltd 2009 8

 The PAS 55
Standard
“Optimised management of physical infrastructure assets”
2004: first published AM Standard Revised 2008
Part 1: 21-point requirements specification 50 participating organisations
Part 2: Guidelines Much more international & multi-secto
26 participating organisations Over 1300 comments, suggestions &
2006: Ofgem stated all UK gas & electr. to refinements incorporated
be PAS 55 certified by April 2008 Restructured, clearer & better
2006: IAM started development of standard illustrated
Assessment Methodology (due Nov ’08)

© The Woodhouse Partnership Ltd 2009 9

 PAS 55 definition of AM
“The systematic and coordinated activities and practices
through which an organization optimally & sustainably
manages its physical assets, and their associated
performance, risks and expenditures over their lifecycle
for the purpose of achieving its organizational strategic
plan”

OR, more simply,

"the optimum way of managing assets to achieve a

desired and sustainable outcome".

© The Woodhouse Partnership Ltd 2009 10

Key Principles Embodied
Asset Management should be…

holistic

sustainable systematic

integrated

optimal systemic

risk-based

© The Woodhouse Partnership Ltd 2009 11

 Structure of PAS 55:2008
Section 4: AM system requirements

4.2 Asset management policy

4.7 Management review

Plan 4.3 Asset management strategy,

objectives & plans
Act 4.3.1 Asset management strategy
4.3.2 Asset management objectives
4.3.3 Asset management plans
4.6 Performance assessment & PAS 55:2008 4.3.4 Contingency planning
improvement Management
4.6.1 Performance & condition monitoring
Do
4.6.2 Investigation of asset-related failures,
incidents & nonconformities
System
4.6.3 Evaluation of compliance
4.6.4 Audit
Structure 4.4 Asset management enablers &
controls
4.6.5 Improvement actions
4.1 General requirements 4.4.1 Structure, authority & responsibilities
4.6.6 Records
4.4.2 Outsourcing of asset management activities
4.4.3 Training, awareness & competence
4.4.4 Consultation, participation & communication
4.4.5 Asset management system documentation
4.4.6 Information management
Check 4.4.7 Risk management
4.4.8 Legal & other requirements
4.5 Implementation of asset management plans 4.4.9 Management of change
4.5.1 Life cycle activities
4.5.2 Tools, facilities & equipment

© The Woodhouse Partnership Ltd 2009 12

 Organization alignment: vital ‘line of sight’
= Corporate or Organisation Strategic Plan
Business Plan

AM Policy (common principles & what must be achieved)

AM Strategy (How policy will be delivered; whole portfolio)

AM Objectives (Specific asset/system contributions)

e.g. Asset Reference

or ‘Whole Life’ Plans
AM Plans (who does what, when & where)

e.g. Investment/construction
programs, operating & Existing Assets New Assets
maintenance plans,
purchasing & contracting
Maintenance Life Cycle
policies etc. strategy & mgmt Evaluation
Life-extension & Project planning
refurbishment & management
Modification Construction &
or Disposal commissioning
© The Woodhouse Partnership Ltd 2009 13
 4.5 Implementation of Asset Management Plans
The organisation shall establish and maintain processes and/or
procedures for the implementation of its asset management plans
and control of activities across the whole life cycle including:
• Creation, acquisition or • Be sufficient to ensure that operations and
enhancements of assets; activities are carried out under specific
• Utilisation of assets; conditions;
• Maintenance of assets; • Be consistent with the asset management
• Decommissioning and/ or objectives;
disposal of assets; • Ensure that costs, risks and asset system
performance are controlled across the asset
life cycle phases

But how do we do this?

© The Woodhouse Partnership Ltd 2009 14

 Lifecycle elements Degradation, technology
overtake, obsolescence,
Utilisation benefits demand changes
Business impact

Acquisition OPEX & Change

CAPEX Projects CAPEX

Utilisation &
Maintenance
(including upgrades, changes
& life extension projects)

Creation/ acquisition

© The Woodhouse Partnership Ltd 2009 15

 Lifecycle: scope for improvements
80% of LCC
determined here

Cost of making changes

Opportunity
to add value
80% of LCC
incurred here

Utilisation &
Maintenance
(including upgrades, changes
& life extension projects)

Creation/acquisition

© The Woodhouse Partnership Ltd 2009 16

Optimized management of assets and their life cycles

Diverse asset needs & opportunities

1. Individual intervention (types, criticalities, condition, performance)
optimization
Is it worth doing and,
if so, when?
3. Activity program
Construct/acquire optimization
e.g. outage strategy &
capital invest. programs,
Utilize

Maintain/modify

Replace/dispose

2. Asset life cycle optimizations

What is best mix of investment, utilization, maintenance, lifespan & risk?
a) Component/equipment level (life cycles)
b) Systems levels (sustainability)
Required by PAS 55: Section 4.3.3
“Asset Management Plans”
© The Woodhouse Partnership Ltd 2009 17
Multiple views of ‘value’ & conflicting objectives

Risk
Efficiency
LIfe Cycle
Compliance
Shine

© The Woodhouse Partnership Ltd 2009 18

 Asset life definitions
• Design life
• Expected/planned life
• Actual life
• Accounting/book life
The predicted, economic life based upon the
the best knowledge of costs, performance, risks
and flexibility that is available at the time
© The Woodhouse Partnership Ltd 2009 19
 Asset Life Cycle Management: A new challenge
1,800

1,600

1,400 400kV
275kV System
1,200 System Built
£m Current Cost

Built

1,000

800 132kV
System
600

400

200

-
50

53

56

59

62

65

68

71

74

77

80

83

86

89

92

95

98

01
19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

20
Years

Transmission System Commissioning Profile

© The Woodhouse Partnership Ltd 2009 20

 Life cycle decisions
Costs &
Risks
(£/year)
Like-for-like replacements

Costs &
Risks
(£/year)
Equipment upgrading
Costs &
Risks
(£/year)
Equipment upgrade with longer life
Costs &
Risks
(£/year)
Earlier disposal of current equipment

© The Woodhouse Partnership Ltd 2009 21

 Net Present Value (NPV)
• Good for considering future cash flows
• Can also be used for risks & performance values
• Needs pre-chosen horizon
• Cannot safely be used if lifespan is a variable
n
Life Cycle NPV = A + M 1 + ∑ p i −1M i − p n S n
i =2

A = Acquisition cost.
Mi = Operating & Maintenance cost in year of life i.
Sn = Resale value at age n
r = Discount rate
p = 1/(1+r) i.e. the discount factor

© The Woodhouse Partnership Ltd 2009 22

 Equivalent Annual Cost
• Good for considering future cash flows
• Can also be used for risks & performance values
• Handles any combination of horizons
• Represents ‘amortized’ total life cycle cost of ownership
 n

r A + M1 + ∑ p i −1M i − p n Sn 
Life Cycle EAC =  i=2 
1 − pn
A = Acquisition cost.
Mi = Operating & Maintenance cost in year of life i.
Sn = Resale value at age n
r = Discount rate
p = 1/(1+r) i.e. the discount factor

© The Woodhouse Partnership Ltd 2009 23

 Developments in life cycle costing
• Various military standards (e.g. ILS: MIL-STD-1388-2B)
• Whole Life Cost - Joint Industry Project
(North Sea Oil & Gas Industry JIP ISO 15663)

• The ‘MACRO’ Project (EU1488)

• The ‘SALVO’ Project
“Strategic Life Cycle Value Optimisation” proposed project due to commence
May 2009

© The Woodhouse Partnership Ltd 2009 24

MACRO project: Asset Mgmt decision-making
Rediscovering some of the existing best practices?
European Investments & Capex Projects
 Design & purchasing: Life Cycle Costing
EUREKA project EU1488  Project prioritisation & cost/risk evaluation
 Repair vs. replace options
 Optimal replacement timing
 Life extension/refurbishment projects

Operating & Maintenance Decisions

 Maintenance intervals
 Inspection/monitoring intvls & alarm points
 Safety testing & failure finding tasks
 Shutdown & Outage programmes
 Work opportunities & clustering
Resources & Purchasing Decisions
 Spares & Materials stock
www.MACROproject.org  Supplier & Purchasing strategies

© The Woodhouse Partnership Ltd 2009 25

The APT-INTEGRATED Toolkit

•Seven independently available modules

•Each addressing a separate decision type
•Common asset register and analysis
database
•Data entry assistance
•Text & graphical and reporting functionality

© The Woodhouse Partnership Ltd 2009 26

 Normal life cycle management limitations
• Weak data
• No quantification of risk/reliability
• Asset life or horizon predetermined
• Difficult to compare options with different lives
• Taxation/accounting issues
• Time value of money - DCF
• Capital rationing/budgeting
• Complexity & ‘selling’ the recommendation
• KPI’s often reinforce short-termism, cheapest solutions
• Departmental conflicts/boundaries
• Quality, reliability, performance, cost mix

© The Woodhouse Partnership Ltd 2009 27

Cost/risk/perf. Managing poor data
calcs.

How we interpret
and use the data

Subjective
judgement

2 to 3 (-ish)
Quality of Data
Guesstimate Measurement

© The Woodhouse Partnership Ltd 2009 28

 Weak data – the disciplines

1. Ask the RIGHT QUESTIONS

2. Of the RIGHT PEOPLE
3. In the RIGHT WAY
4. And SHOW THEM HOW THE DATA IS BEING
USED

© The Woodhouse Partnership Ltd 2009 29

 Finding the best compromise
APT ‘what if?’ modelling

Optimal
combination

Net consequences
of delay

‘Premium’ paid
for compliance

© Decision Support Tools Ltd 2007

© The Woodhouse Partnership Ltd 2009 30

GROUPING of multiple tasks with different optimal timings

Impact of delay is small

compared to alignment
advantage (every 2nd visit)

© The Woodhouse Partnership Ltd 2009 31

 Case study 1: DCS Renewal
# IO / DCS System - Installed IO
Plants Provox DeltaV D3 Yokogawa ABB Honeywell Total IO ABB Honeywell
ChemOps 28468 14032 26056 3585 2523 74664 5% 1%
ChemOps 26152 10632 36784 Yokogawa
ChemOps 31000 7830 38830 18% Provox
ChemOps 800 38500 4000 43300
40%
ChemOps 20500 20500
ChemOps 4750 3050 7800
ChemOps 5200 5200
ChemOps 1992 1992
D3
ChemOps 3300 3300
25% DeltaV
ChemOps 752 752
93162 25664 57188 42085 11723 3300 233122 11%

Systems Status • 6 DCS Systems - 5 DCS Vendors

Emerson DeltaV – Latest Technology, Full Support
• 230k IO signals
Yokogawa CS3000 – Current Technology, Full Support
• 20% went obsolete in 2005 (Provox)
ABB Advent Mod300 – Aging Technology, Full Support
Emerson Provox – Aging Technology, 40% Obsolete Components
• 20% obsolete by 2013 (Provox)
NovaTech D/3 – Updated Technology, Good Support
Honeywell – Aging Technology, Full support Note: 15k Provox IO installed in Eur

© The Woodhouse Partnership Ltd 2009 32

 Proposed global DCS strategy
Actual: Special Products Middle East Europe

230k I/O 2000k I/O 250k I/O

Proposal:
Rationalization from 6 to 2 2009
DCS for brownfield:
•Yokogawa
•Emerson

DCS benchmark among Europe, ME & Special Products to develop:

•Technical evaluation & specifications
•Commercial evaluation
•Selection criteria definition
Note: Include PLC/SIS Is this the correct strategy?
If so when should we implement?

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Production impact uncertainty and capture all assumptions

© The Woodhouse Partnership Ltd 2009 34

Evaluation of life cycle alternatives and optimal timings

2015

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 Sensitivity analysis

2015 2019
Outage Outage

© The Woodhouse Partnership Ltd 2009 36

 Conclusions
• Provox does not need to be upgraded before 2015.
• Life cycle Analysis confirmed the optimum upgrade in 2015, utilizing the
old components of Provox.

2015

© The Woodhouse Partnership Ltd 2009 37

 Benefits
• Planned Provox upgrade in 2009 is not optimal, 2015
is the optimal upgrade point.
• Shift of the capital investment of $200 MM DCS-
Upgrades by 6 years results in an Cashflow Benefit of
$9 MM NPV
• Risk analysis and lifecycle analysis of the most urgent
units show that this opportunity is conservative even
including risk implications.

© The Woodhouse Partnership Ltd 2009 38

 Case Study 2:Heat exchanger renewal
But when?
And what is the optimum
lifecycle of the new vessel?
Function of the asset:
• Phosgene Vaporizer
Reason for study:
• Phosgene concentration in the
enclosure above limit value 100 ppm
Root cause :
• Loss of mechanical integrity:
insufficient sealing of rolled sealing
between pipes and pipe-plate result
in 10 – 100 ppm
Potential solution(s):
• Replacement of exchanger

© The Woodhouse Partnership Ltd 2009 39

 Additional factors
• Objective to extend shutdown intervals
• Next planned shutdown 2011
• Culture of shutdown every year
• Phosgene is dangerous
• Emotive response to phosgene plant/equipment
• Hence drive to shutdown in 2009 to replace heat
exchanger
• Replacement causes 9 days total plant shutdown

© The Woodhouse Partnership Ltd 2009 40

 Results and recommendations
Total
costs/risks with
Total
special
costs/risks
shutdown
Special Shutdown now Special Shutdown 2011
Special Shutdown 2011
Total
Planned costs/risks
replacement 2015 using existing
Failure risk shutdown
Existing Shutdowns

2011

Conclusion:
-Special shutdown for replacement is not justifiable, NPV minimum
k$1,100
-Earliest existing shutdown (with 9 days of work opportunity) should be
used for replacement

© The Woodhouse Partnership Ltd 2009 41

 Case Study 3: Asset portfolio lifecycle optimisation
(Bringing it all together )
TAR Tasks after TAR Tasks
Initial Task List TAR Tasks after TAR Tasks after
Expert needing cost/risk
(all activities) Initial Screening Timing Filter
Assessment¹ modeling

Plant 1 5392 2135 890 48 19

Plant 2 1616 698 157 59 2
Plant 3 8301 2066 863 139 8
Plant 4 4475 1826 127 2 2
Plant 3 4476 1150 390 72 55
Total 24260 7875 2427 320 86

© The Woodhouse Partnership Ltd 2009 42

Individually Optimised shutdown strategy

Activities forcing short-

cycle TAR work
© The Woodhouse Partnership Ltd 2009 43
De-bottlenecking tasks to reduce these constraints
Study Describtion ref. Determining PM Debottleneck Possible sollution
Failure mode Frequency timing
needed
CHL-041 GRP- Anolyte Knock-out V14124 De-lamination of GRP 12 Month ASAP Order spare unit
drum
CHL-045 GRP- Suction tank II , V1471 De-lamination of GRP 12 Month ASAP Order spare unit ,
caustic service

BPA1-001 Acid removal collumn V510 Reduction in 24 Month re-clad within 30 replace cladding of vessel
wallthickness Month
BPA2-046 Tar vent Pipe - cleaning SW 2150 Fauling lost efficiency 18 month WC at opportunity on- line / 50 % improvement
before next
cleaning window
BPA2-021 Presure controll valve N2 PCV If it is too low we stop 12 month WC at opportunity Spare unit at stock
service to Flaker line 1, 21502120/ the system ( line 1
planned inspection 1 flaker), when the flow is
too high we spill N2
BPA2-024 Phenolic Recycle water XC Fauling lost efficiency 6 month WC At opportunity / Spare unit at stock
breather, service on 21107103 eliminate root
V21170, planned Cause root
inspection

N.B. Several constraints are removed by purchasing a ‘hot-

swap’ spare and enabling on-stream (‘pit-stop’) maintenance

© The Woodhouse Partnership Ltd 2009 44

Cost/Risk DE-BOTTLENECKED’ & RE-OPTIMIZED

Assuming the de-bottlenecking projects:

new optimal plan = 4 Year Interval
NPV €20 M
© The Woodhouse Partnership Ltd 2009 45
 Asset life cycle management: Key Messages
• Asset Management is a multi-disciplined & multi-level
business process
• PAS 55 is a specification for optimised management of
physical assets
• Life cycle management is a fundamental part of an asset
management system
• Conflicting demands make life cycle management difficult
• Optimisation must be carried out across all assets and systems
within the asset portfolio & over the life cycles
• Tools and techniques are available to assist in managing these
conflicting demands
• Rewards for getting it right are huge!!
• Penalties for getting it wrong are severe!!

© The Woodhouse Partnership Ltd 2009 46

Thank You!
www.twpl.com

© The Woodhouse Partnership Ltd 2009 47