August 2024
Digital Features
Digital Feature: Minimizing the cost of corrosion: Budgeting for industrial asset preservation
Advanced budgeting for corrosion protection is critical to industrial facility management. Since the urgency of the matter is often not realized until a failure or accident occurs, the article provides several tips to help maintenance, purchasing or corporate teams start budgeting for preservation before an emergency happens.
Ana Juraga, Cortec Corp., Zagreb, Croatia
What happens when a simple pump fails at an oil and gas facility, and all the backups are rusty? While a pump may be one of the least expensive assets on site, the ultimate price tag of unusable critical spares can be millions of dollars if production is shut down for weeks or months while waiting for a replacement to be delivered. That is why the author’s company recommends advance budgeting for corrosion protection as a critical part of industrial facility management, especially in the energy sector. Since the urgency of the matter is often not realized until a failure or accident occurs, the tips below are intended to help maintenance, purchasing or corporate teams start budgeting for that important step of preservation before an emergency happens.
Tip 1: Do a cost-benefit analysis. Maintenance and purchasing departments are often evaluated based on how much money they save, not on how many headaches they avoid. Therefore, it is helpful to do an overall cost-benefit analysis before presenting a preservation budget to superiors. This should take into consideration asset value, cost of restoration, cost of shutdown, safety factors and lead time for replacement parts. The last three factors are especially critical. Although millions of dollars of assets often sit unprotected in an oil and gas facility yard or warehouse, the true price of losing an asset to rust is the cost of losing the equipment’s function. What happens if there is no replacement for a critical part? What is the estimated loss of production per day? While a typical approach is to say, “Just get a new part,” this is easier said than done. Many refineries are in distant areas where shipments can take a long time. If there is a supply shortage or the asset is a custom part, procurement may be delayed for months or years longer. The effect of these delays must be considered, as well as the potential safety risks if one were to install a rusty part.
Tip 2: Find a preservation advocate. Often, critical preservation does not happen without someone taking ownership of the problem. Understandably, most departments will not want to take responsibility for a preservation budget that has no immediate return and just looks like another request for more money. Maintenance may shift the responsibility to purchasing and vice versa. Workers may know there is a problem but not be heard. If this is the case, the first step is to appeal to company specifications, which almost always includes a preservation requirement and essentially obligate corporate management to provide funding. How much money management is willing to allot may depend on the size of the facility, so maintenance and purchasing departments should leverage this factor in their discussions, when appropriate, based on the potential impact of failure. Whether maintenance or purchasing should take the bulk of the responsibility depends on whether the assets are warehouse spares (maintenance jurisdiction) or new incoming equipment that needs preservation until installation (purchasing jurisdiction). If management is still ignoring requests, sometimes all that is needed is to call in a preservation consultant to reiterate what employees have been saying all along and advocate for change.
Tip 3: Estimate preservation costs. Once management has approved a preservation budget, the appropriate department will want to call in a preservation services company to evaluate preservation needs and estimate total costs, if they have not already. The service provider may evaluate the condition and value of assets onsite, then calculate material costs, worker costs and estimated days needed to reach a stable state. The preservation services provider may offer full turnkey preservation services or simply training and materials to the facility’s existing employees. Estimating the full costs of these preservation options will help departments provide a more precise budget to management for further review, discussion and final decision-making.
Well worth the cost. The initial cost of preservation is negligible compared to the multiple millions of dollars’ worth of assets saved, not to mention the tens or hundreds of millions of dollars that might otherwise be lost from an extended shutdown. Above this is the intangible value of protecting worker safety. When taking these factors into account, budgeting for asset preservation is well worth the cost.
How to reduce excess inventory by proper spares preservation. It is not uncommon for a new oil and gas construction project to cost anywhere from $10 MM–$500 MM, while megaprojects can cost in the multi-billions. These capital-intensive projects may spend hundreds of millions of dollars on spares alone. At such high stakes, even a small buying or management change can have a big impact on increasing or reducing project costs. Proper preservation and asset management technologies can add up to substantial monetary savings coupled with smoother, safer startup and ongoing operations. A typical oil and gas construction job will buy an additional 10% (on average) of spares in three different categories:
- Construction spares
- Startup/commissioning spares
- Insurance and operating spares.
The reason is that some components are expected to fail prior to startup due to mechanical damage, manufacturing flaws or corrosion. Without backup spares, the discovery of defective equipment at the time of installation or startup could be disastrous, especially in remote areas where delivery lead time is excessive—even if replacement parts were readymade. Forecasting spares by 10%, 12% or 15% extra is therefore a normal part of risk management.
Since corrosion is a major culprit for component failure, rust prevention can reduce the number of spares needed. Considering how quickly the cost of spares adds up, a little planning and some good preservation materials could have significant return on investment.
Preservation of construction spares. Proper preservation must start with primary equipment to ensure that high-dollar—often custom—assets such as heat exchangers, fractionation towers, tanks and modules will survive the transit and storage period without corrosion. Basic preservation materials for internal void space preservation, for hydrotesting and layup, and for external protection are relatively simple to apply and go a long way toward preserving assets in like-new condition, so that fewer backups are needed at installation and commissioning.
Preservation of startup spares. Startup spares should be preserved along similar lines. Hydrotesting valves, pumps and vessels with corrosion-resistant coating will help protect against the residual moisture that inherently gets trapped inside during hydrostatic testing. The fogging of voids with vapor-phase corrosion inhibitors is also beneficial because the protective vapors form a molecular corrosion-inhibiting layer on metal surfaces until the enclosure is opened. Films and bags with ultra-violet (UV) resistance serve multiple functions by trapping these vapors inside a space, creating a durable barrier to wind and rain, and actively inhibiting corrosion through their own embedded rust preventative chemistry. Protective coatings are great for temporary protection on exposed metal surfaces such as flange faces.
Preservation of insurance and operating spares. Once the facility moves from startup to full operation, the plant will continue to require backups or operational spares to ensure continued uptime. As in other stages, good asset management and preservation of operational spares are critical to keeping parts corrosion free and ready to install on short notice. It can also be good evidence of a proactive safety management plan. In either case fogging fluids, films and coatings provide an excellent path to preservation.
Optimizing project planning and engineering. Preserving spares at all three stages and documenting the process is a growing trend in asset management with promising results. It is critical to not only take care of the assets throughout their life, but to be able to provide detailed proof of care to stakeholders. This “proof of care” gives project owners a greater chance of reselling or transferring the spares to the next stage of the project rather than scrapping excess inventory and writing it off as a loss. It offers peace of mind and facilitates smooth operations. It can also mean significant savings up front by reducing the number of spares needed.
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