Unplanned downtime has long been an ongoing maintenance issue in the oil and gas industry, but how much do organizations lose when operations are interrupted? As the industry continues to mature and oil prices remain low, the negative impact of unplanned downtime on the bottom line will only increase.
Compounding the issue is the loss of industry experience as older, more knowledgeable workers age out of the workforce. A study by Mercer found that over 50% of professionals in oil and gas plan to retire in the next 5 to 10 years.
Evaluating the cost of unplanned downtime
A 2016 study by Kimberlite, an oil and gas market research company, quantified the costs unplanned downtime have on the industry. According to the study, the cost of downtime is not cheap. On average, offshore organizations experience $38 million annually in costs from unplanned downtime. Organizations with the worst measured performance saw financial impacts north of $88 million annually.
Even short intervals of unplanned downtime can have significant financial impacts. The Kimberlite study found that just a 1% downtime rate, equivalent to 3.65 days, costs more than $5 million per year. Offshore organizations average more than 27 days of unplanned downtime, or $38 million yearly.
Maintenance and downtime
Despite the large financial impact unplanned downtime can inflict, few oil and gas organizations utilize optimized maintenance strategies. Three out of four organizations take either a time-based or reactive approach to maintenance. Less than 24 percent report their maintenance strategy as predictive and focused on data or analytics. Of the offshore facilities evaluated in the Kimberlite study, roughly 42% were over 15 years old.
For those organizations that do use a data-driven, predictive approach, they see their downtime reduced by 36% compared to those with a reactive maintenance strategy. The result is $34 million in cost savings annually. According to the study:
“Updating maintenance practices to more predictive efforts— driven by digital technologies and data-based optimization—can enable offshore production facilities to reduce their unplanned downtime and drive better operational efficiency”
The importance of data
A data-driven approach to maintenance allows for more efficient upkeep and proven results to lower costs. Opportunities to integrate data or analytics include:
- Implementing optimized CMMS/EAM systems to record and properly track data.
- Standardized collection and management of data related to asset conditions, failures, and performance
- Exploiting analytics as well as industry best practices to move towards predictive maintenance techniques
However, simply collecting more data is useless if organizations do not know what to do with it. In a separate study, around 60% of operators report challenges dealing with the outcomes of gathered data. For these reasons, uniform data standards are essential if organizations plan to implement advanced asset optimization.
Uniform data provides accurate summary level information and reports to improve operational and strategic management capabilities at all phases of the asset lifecycle. A Standard Operating Procedure (SOP) helps to maintain company knowledge when experienced operators exit the workforce. An example of an effective SOP could be the foundational data formats or required data for CMMS equipment, such as equipment numbers or physical location.
Oil and gas organizations should move their maintenance approach from reactive strategies to predictive strategies, as it’s shown to reduce unplanned downtime by as much as 36 percent. More optimized maintenance strategies, including reliability centered maintenance (RCM) or risk based inspections (RBI), also help to optimize maintenance while reducing costs. RBI, for instance, identifies equipment that poses little to no risk. These low risk assets require low inspection coverage and minimal mitigation because of the acceptable level of risk they pose to safety or operations. Prioritizing resources towards higher risk equipment, while reducing inspections on non-critical assets, streamlines maintenance while reducing costs. Additionally, because the number of inspections is reduced, the volume of data is proportionally reduced as well, leading to a smaller data set and more accurate information.
With only a 1% rate of unplanned downtime costing more than $5 million annually, even small changes to optimize maintenance can materialize into large savings.
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