W7_ASY_Reduction of Operation & Maintenance Cost for Oil and Gas

Problem Statement

Maintenance productivity is one of the most important issues which govern the economics of production activities. Talking about productivity it will end to the question of how much cost we can reduce because of increasing productivity or how much we loose because of degrading productivity. Now I want to talk about what kind of aspects is possible to be an alternative to reduce cost in operation and maintenance

Development The Feasible Alternatives

According to Society of Maintenance and Reliability Professional the important measures of maintenance productivity are:

  1. Total cost of maintenance/total production cost
  2. A (availability) = (planned time – downtime)/planned time
  3. P (production rate) = (standard time/unit)x(unit produced)/operating time;

    where; operating time = planned time – downtime;

  4. Q (quality rate) = (total production – defective quantity or number)/totalproduction;
  5. Mean time to repair (MTTR) = sum of total repair time/number ofbreakdowns;
  6. Mean time between failure (MTBF) = number of operating hour/number ofbreakdowns;
  7. Maintenance breakdown severity = cost of breakdown repair/number ofbreakdown;
  8. Maintenance improvement = total maintenance manhours on preventivemaintenance jobs ÷ total manhours available;
  9. Maintenance cost per hour = total maintenance cost/total maintenance manhours;
  10. Man power utilization = wrench time/total time;
  11. Manpower efficiency = time taken/planned time;
  12. Material usage/work order = total material cost/number of work order; and
  13. Maintenance cost index = total maintenance cost/total production cost.

And according to Kumar and Ellingsen, 2000 the measures of all maintenance productivity as performing indicator for oil and gas industry mentioned above are classified into Productivity, Technical Integrity, Maintenance Manhour Parameters and Deferred Production.

Development Outcomes of Alternative

In order to achieve the best maintenance performance there is an approach from management divided into 5 categories as follows:

  1. Business and Management : Skills used to translate an organization’s business goals into appropriate maintenance and reliability goals that support and contribute to the organization’s business results
  2. Manufacturing Process Reliability : Maintenance and reliability activities to the manufacturing process of the organization to ensure that maintenance and reliability activities improve the manufacturing process.
  3. Equipment Reliability : Two kinds of activities that apply to the equipment and processes for which the maintenance and reliability professional is accountable. First are those activities used to assess the current capabilities of the equipment and processes interms of their reliability, availability, maintainability, and criticality. Second are the activities used to select and apply the most appropriate maintenance practices, so that the equipment and processes continue to deliver their intended capabilities in the safest and most cost-effective manner.
  4. Organization & Leadership : Processes for assuring that the maintenance and reliability staff is the most qualified and best assigned to achieve the maintenance and reliability organization goals
  5. Work Management : Skills used to get the maintenance and reliability work done. It includes planning and scheduling activities, quality assurance of maintenance activities, stores and inventory management.

And the cost component of operation and maintenance can be classified into 6 categories as follows:

  1. Operations and administration
  2. Site maintenance
  3. Equipment and supplies
  4. Labor
  5. Parts
  6. Consumables

Selection of the alternative

To reduce cost in operation and maintenance at least there are 5 alternatives:

  • Assign Tasks to Outside Services: Outsorcing contract outside service organizations to provide some or all of the O&M services, especially in the early years of a project
  • Condition Monitoring: to minimize reactive work
  • Aftermarket Components: reduce cost of inventory
  • Innovative Rigging and Tooling (or addressing to new technology): increase productivity
  • Good recordkeeping: management of change, lesson learned

Analysis/ Comparison of the Alternatives

After giving attributes each cost component for operation and maintenance with weigthed factor then we can tabulate cost reduction option and cost component in matriks as shown in table below:


Selection of the Best/ Preferred Alternative Compared against the Criteria

The criteria of each action plan for reduction cost is that a measure level must be kept at its original level meet the preset succes criteria for maintenance or improve better. The result of prioritization using multi attributes of alternatives and evaluated based on each weighted factor given before and the process is described as tabel below:


Performance Monitoring and Post Evaluation of Result/ Follow up Assessment

The improvement process for reducing cost above is an interaction process. All parameters usually dependent to another process as a part of integrated system. The important factor should be considered is how to determine what kind of action plan at certain level of hierarchial part of the company to ensure the cost effectiveness of alternatives itself.


  1. Sullivan, William G., Wick, Elin M., Koelling, C. Patric. (2012), Engineering Economy. Chapter 5 Pp. 178 – 211, Fifteenth edition, Prentice hall.
  2. Brassard, Michael., Ritter, Diane. (2010), The Memory Jogger 2nd Edition (pp.112-117). New Hampshire, United States: GOAL/QPC.
  3. Kumar, U. and Ellingsen, H. P. (2000). Development and implementation of maintenance performance indicators for the Norwegian oil and gas industry. Proceedings of the 14th International Maintenance Congress (Euro maintenance,2000), 7-10 March, Gothenburg, Sweden, pp. 221-228.
  4. Society for Maintenance & Reliability Professionals (2012). Body of Knowledge. [ONLINE] Available at: http://www.smrp.org/i4a/pages/index.cfm?pageid=3323. [Last Accessed 9 October 2013].

1 Comment

Filed under Asyhad, Week 07

One response to “W7_ASY_Reduction of Operation & Maintenance Cost for Oil and Gas

  1. AWESOME Pak Asyhad!! Nicely done. I loved your case study and your analysis was spot on!!

    My only advice to you would be to get at least one week AHEAD of schedule so that you have a CONTINGENCY or BUFFER in case something happens (risk event) which prevents you from posting for one week?

    Does that strategy make sense to you?

    Keep up the good work!!!

    Dr. PDG, Jakarta

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