Optimize your CapEx and OpEx with a Holistic Terminal O&M Philosophy
When it comes to offshore construction, investors and owners often miss one valuable piece of the puzzle – long term continuous operation and maintenance (O&M). O&M is not something to be considered an afterthought, but instead, an investment to be considered from the very beginning, with holistic application throughout the project lifecycle. In this way your terminal will not only function more efficiently, but also at a better OpEx, with smaller CapEx.
Offshore construction with O&M in mind
When it comes to designing and constructing an offshore terminal, it is of paramount importance to determine two aspects before proceeding. What are the requirements in terms of throughput? How is the terminal going to be operated? Once this has been established, the basis of design can be finalised incorporating al the operational needs and design requirements. Thus, giving a blend of design parameters that ensure optimisation of both CapEx and OpEx. Typically, this would be intrinsic to establishing the budget and the EPC Contractor would need to construct in line with the above parameters. Is it thus fair to ask: “Have the interests of all stakeholders been considered?”
When approaching offshore construction holistically, it stands to reason that those who will use and regulate the facility should be involved in the design and construction process to ensure capital costs and operating expenses are optimised, while the ongoing integrity of the system is maintained.
Decisions should not be governed simply by minimising the design and fabrication costs. Instead, start by creating an operating philosophy document for O&M that deals with the entire value chain and lifecycle of the project.
Discrepancies from FEED to O&M
Over the years it has become obvious throughout the development process, that there were inconsistent contractual priorities when converting the Front-end Engineering & Design (FEED) concepts into reality (conflict between project management being short-term and operational management being long-term having different priorities and consequences).
We have to keep in mind that the owners, or financiers, will not be the operators of the terminal. This means that by the time these facilities are completed, the contracting structure (from FEED through to project champion) will involve investors’ consultants, the EPC contractor, contractors’ consultants, subcontractors and vendors.
The ‘Missing Man’ here is the future operator, who will inevitably take full care and custody of the facility under the O&M contract.
The needs and vulnerabilities of this stakeholders are often not considered by the preceding contractors, as it’s not the scope of any individual participator, leading to discrepancies between what is functional, what is required and what is constructed. In such cases, a lot of time and money has gone to waste.
To ensure that this does not happen to you, we suggest reaching out for a holistic approach based on the principle of interface management.
This very important consideration should not be stitched on in the end, but instead, be integrated into the design, engineering, fabrication, installation and operation processes right from the start of the project design.
The focus here will be on operational costs, to save on construction while building a terminal perfectly suited and regulated to meet your site-specific needs.
Optimising OpEx with O&M
For any project there needs to be a minimum viable product (MVP) with focus on OpEx (operational cost) optimisation. This is in part achieved through the conversion of the O&M philosophy into a basis of design, thus ensuring that operability is considered and catered for in the end design.
OpEx optimisation is best achieved by influencing the facility’s design and engineering at the early stages of the project because changes made at this stage can be made with the lowest cost impact while, at the same time, maximizing the design effect on long term OpEx. This is MARSOL’s operational engineering approach.
There are numerous components involved in ensuring the integrity of the system throughout its operating life, including design life realization, life expectancy and possible life extension, which should all be considered as part of the base of design inputs.
As an operating company, MARSOL is not only focused on sound design principles in order to optimize OpEx, but also to ensure sound design and component inputs to offer an underwritten long-term integrity management service.
Long-term integrity O&M
If your terminal is long passed its FEED stage, you can still optimise. MARSOL has invested years of experience and knowledge of the field into the creation of Marsol’s Advanced Systems Integrity Management (ASIM). ASIM uses data collection, analysis, holistic field condition data and methodologies (both physical and operational) to arrive at the optimum design for the site and service. This is of paramount importance as quite often, the operating environment in the modern-day context is changing, and thus the design parameters are no longer relevant and modifications may be needed.
Although ideally applied through design and construction, ASIM is effective at any point in the project lifecycle, because it follows the Marsol continuous improvement cycle which is aligned with The Deming Cycle.
The Deming Cycle (also known as PDSA Cycle), is a logical sequence of four repetitive steps for continuous improvement and learning.
The only constant we know is change. As investors and management, it is paramount to fully understand the implications of the changes, and adjust accordingly, as part of the integrity management regime.
Over the last 50 years, Marsol International Personnel has developed engineering solutions for the fabrication, commissioning and operation of offshore terminals and infrastructures. During that period, we have increasingly identified and reengineered points of failure in many different systems. Some were generated by design and engineering, but many by the changing environmental conditions and by operational practices not suited to that particular facility.
Controlling your CapEx with O&M
Although operating expenditure is crucial to a project’s success, the up-front capital expenditure (CapEx) is equally important. It is true to say that a sound OpEx Minimum Viable Product is maximised by sound design and engineering at the CapEx stage. However, if CapEx is considered in isolation, OpEx can be negatively affected. Costing you more in the long run.
This being the case it is vital to focus on design and engineering optimisation that not only takes into account the end goal and client requirements, but also considers expediency and cost-effective fabrication, material and component selection, installation methodologies, the operating environment and personnel.
Within the CapEx there are separate cost drivers that should be identified and accommodated. Right from the outset, during the FEED process design, decisions should not be governed simply by minimising the design and fabrication costs.
Consideration should include the cost of installation and operation, including preventative, and corrective and preservation maintenance principles. Assigning the responsibility for design and installation to an EPC contractor may facilitate the first step, but not the second; generally, the design has been approved already (often a variation of a generic design) by the client before issuing the tender. This places you back in the realm of discrepancy between FEED and long-term O&M.
An example of the above is the pipeline design: a pipeline needs specialist equipment, which in itself will require significant mobilisation and operating costs; at this stage, the advantages that could be gained by acquiring a more robust and costly pipe (one that could eventually result in savings in installation costs and have potential for a longer lifespan) will have been forsaken.
It is the same principle as the OpEx optimisation model: First we need to take the O&M philosophy, and resultant basis of design inputs, and then create a design, engineering and installation regime that encompasses all the requirements. It must optimise fabrication and installation costs while at the same time supporting the long term integrity management service.
When all is said and done, a facility that has a reduced risk of failure and the potential for life extension allows the parties to offer and underwrite such a service. This approach then addresses not only the client’s requirements, but also the needs of the other stakeholders, with regards operability.
Decisions should not be governed simply by minimising the design and fabrication costs.
Starting with an MVP
Marsol has developed a holistic approach to CapEx optimisation that has been established with a focus on SPM integrity management. This means that by combining the two skills sets, the client can be offered a full turnkey solution from FEED to operations, supporting the owner, EPC contractor, OEMS and future operators responsible for O&M.
This approach allows the smooth transition from FEED to long-term operations and protects all parties’ interests, avoiding costly (and potentially reputation-damaging) contractual discussions and disputes and replaces the blame game with sound technical solutions.
It is important to remain cognisant of your impact on the environment throughout the entire process. This is not only limited to -for example- a loss of containment incident and the obvious subsequent spill, but also the knock-on effect to unrelated parties (fisherfolk as an example) who are stakeholders to the environment in which your facility operates. Important to note that your day to day operations (without any incidents) may also affect these stakeholders in a negative way.
ASIM was originally developed to address similar criteria at brownfield installations without the benefit of being involved at FEED or basis of design phase. The principle of ASIM is to enter an existing field with the intent of establishing a holistic picture of the field and its operations. Then through the assessment of design criteria, historic information, new data and using experience gained on multiple sites, at different geographic locations, over extended periods of time, arrive at a site-specific integrity protocol. By creating the history you are providing managers the tools to make informed decisions, thus fulfilling their fiduciary duty.
By adopting a rounded, full lifecycle approach it is possible to ensure that all stakeholders take an approach that optimises both cost and operational efficiency at the minimum acceptable risk level over the entire life of a facility. The result is a win-win situation for all concerned.
Starting a new project with your eyes on CapEx optimization? Don’t settle for mediocre: Talk to the experts.
Ready to optimize an existing project’s O&M? Let’s discuss.