SPE-187452-MS

Subsea Spares Analysis: Using Reliability, Production Impact and Cost Data
to Deliver Optimum Value

C. Bonini and Y. Clarke, Chevron

Copyright 2017, Society of Petroleum Engineers

This paper was prepared for presentation at the SPE Annual Technical Conference and Exhibition held in San Antonio, Texas, USA, 9-11 October 2017.

This paper was selected for presentation by an SPE program committee following review of information contained in an abstract submitted by the author(s). Contents
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Abstract
Subsea spares are expensive to procure and store; however, the potential consequences of having spares
unavailable when required can be even worse. The main objective of this study is to create a tool to assist
with the evaluation of the optimal number of spares for each subsea equipment, considering item cost,
maintenance requirements, lead time and production impact.
The first step of the spares analysis process is to understand how reliable/unreliable the equipment is.
This is carried out by following FMEA (failure modes and effects analysis), i.e. identifying failure modes,
failure frequencies, failure consequences and repair scenarios (such as mean time to repair) based on asset
specific performance data and industry historical data. The maximum number of spares depends on the cost
associated with maintaining that item in storage and performing preventive maintenance. The minimum
number of spares is determined by probabilistic analysis, based on Poisson distribution functions.
A Spares Analysis Tool was developed: it uses Poisson probability distribution and a cost-benefit analysis
to calculate the ideal number of spares. This Excel based tool allows the subsea team working on the Frade
project to be able to quickly evaluate the proper stock level of key components and ensure continuity of
operations in a reliable and cost efficient manner. It also allows adjustments to be made according to changes
in the oil price (which affects the criticality of the spare in terms of total Lost Production Opportunity,
or LPO), and in case changes in failure rate are observed for a specific component over a long period of
time. Failure rates can vary significantly depending on equipment operating conditions, and because of that,
industry historical data may not always reflect the reality of every single project.
The results obtained by using this tool also assist with communicating with management and justifying
expenditures in a scenario where costs need to be reduced.
No previous information related to the development of a tool to determine the optimal number of spares
was found. In the current oil price environment, this tool can bring an important contribution by assisting
teams to make informed decisions based on statistical information and field-specific failure data.
The strategy provides a reliability and risk based approach in the decision-making process.
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Introduction
The quantity of subsea spares for commissioning and the first few years of operation is usually defined in
the later stages of the project phase, using previous experiences from other projects and fields. However,
after a few years of operation, it may become apparent that the project spares quantity was either under
or overestimated. The team operating the field is responsible for ensuring enough spares are available - in
deepwater fields, not having the spare parts when required can lead to substantial LPO.
The Chevron Frade asset (operating in Rio de Janeiro, Brazil) in conjunction with ETC (Energy
Technology Company) reliability team, developed a Spares Analysis Tool that utilizes both field specific
and general oil and gas industry reliability data, cost of failure, and cost and lead time of spares to calculate
the optimal quantity of spares for each equipment.
The tool is designed to be maintained over the life of field, incorporating changes in production profile,
new wells, improvements in reliability and oil price fluctuations that will dictate optimal spares holdings.

Statement of Theory and Definitions

A spares philosophy defines a high level guiding principle for the provision and management of subsea
spares, which is in line with the operations philosophy.
The spares strategy provides a plan of action to implement the philosophy, which answers three key
questions of subsea spares management:
1. What spares to stock?
2. How many should be stored?
3. Where should they be stored and how should they be maintained?
The strategy provides a reliability and risk based approach in the decision-making process.
The key principle of a spares philosophy is to maintain safe operation, maximize production, and reduce
operational cost:

• Maintain safe operation is to ensure that safety critical spares are available when required to
mitigate the potential consequences of a safety-related event. Safety critical spares should be
assessed against safety targets.
• Maximize production is to ensure production critical operations spares are available when required
to minimize productions downtime. It shall be replaced on failure wherever possible and repaired
offline (e.g. Chevron onshore workshop or vendor facilities).
• Reduce operational cost is to optimize spares holding and other aspects of spares management to
avoid unnecessary spares procurement cost, holding and maintenance cost.
The main challenge faced in the Frade asset was the definition of a list of spares for SCMs (subsea control
modules), choke modules, EFLs (electrical flying leads) and SFLs (steel flying leads). The high cost to
purchase and maintain spares for this equipment, combined with the long lead time for critical items, make
proper analysis crucial to ensure company's resources are being used in an intelligent and cost-efficient way.
The following categories of equipment will be considered for spares:

Major assemblies
Items in this category are usually production critical, with low probability of break down but significant
interruption on production if they do, and often associated with high cost and long lead time.
Examples are Subsea Xmas tree assembly, subsea valve assembly, etc.
The spare assemblies are usually procured during the project phase along with the main equipment
deliverables under project CAPEX (Capital Expenditure) budget, and are carried over to the operations
phase.
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Retrievable packages
Assemblies consist of packages, and some of the production critical and generally unreliable subsea
equipment is designed to be retrievable and replaceable. Spares are generally recommended for this type
of equipment.
Examples are choke module, subsea control module, etc.
Some spare packages are procured during the project phase along with the main equipment deliverables
under project CAPEX budget, and are consumed by operations and replenished to an acceptable level.

Consumable parts
Packages are broken down into parts. Once a package is retrieved from subsea, it is normally returned to the
original equipment supplier for refurbishment. During refurbishment, some parts will need to be replaced
by new ones, and the turnaround time required to bring the package back to stock or back to production line
is dependent on the availability of the consumable parts. If the consumable parts are readily available in the
workshop, it can significantly reduce the turnaround time. Spares are also recommended for the consumable
parts used on retrievable packages.

Description and Application of Equipment and Processes

To develop a spares analysis, the following aspects were considered:

Reliability and Failure

The need for spares is primarily driven by the unreliability of the equipment within the system under
consideration; therefore, the first step of the spares analysis process is to understand how reliable/
unreliable the equipment is. This is normally carried out by following a FMEA (failure modes and effect
analysis) process, i.e. identifying failure modes, failure frequencies (such as mean time to failure - MTTF),
failure consequences and repair scenarios (such as mean time to repair - MTTR) based on asset specific
performance data and industry historical data.

Performance Target
The need for spares is also driven by a performance target, such as production target, which is translated to
reliability target, and then cascaded down to equipment reliability targets.
Having adequate spares in stock can minimize the potential impact to production if the equipment can
be replaced and brought online quickly. The number of spares is not only determined by the reliability/
unreliability of the equipment and performance target, but also determined by company finance and the
level of risk that operators are willing to take.

Cost and Lead Time

The most up-to-date procurement cost and lead time need to be investigated for spares candidates (assembly,
package or part). This is the basis of the cost-benefit analysis on whether to procure spares or not, and how
many.

Analysis Methods
The analysis methods introduced in this section are reliability and risk based, and should be used to process
the information gathered above and to facilitate spares decision-making process. The selection and use of
analysis methods will depend on the time and information available.

Poisson analysis
The number of spares can be estimated based on the expected number of failures within a certain time-period.
If we assume failure events of subsea equipment occur with a known average rate and independently, the
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probability of a given number of failure events (x) occurring can be determined by the Poisson Probability
Density Function:

where
λ = Failure rate
 t = Time period
 n = Number of items
 nλt = Mean number of failures in time period t for n items
 x = number of failure events
The probability of having x or fewer number of failure events is determined by the Poisson Cumulative
Distribution Function (CDF):

where
λ = Failure rate
 t = Time period
 n = Number of items
 nλt = Mean number of failures in time period t for n items
 x = number of failure events
The minimum number of spares is determined by the CDF compared with a confidence level (CL), and
calculated by the equation below:

CL is the confidence level that spares will be sufficient to cover the number of failures occurring in each
time period t, often in the range of [90%, 95%].
Poisson analysis can be used at package or part level depending on the problem in hand. The following
inputs are required:

• Failure rate of the package

• Period to be supported, i.e. the re-supply time

• The number of packages in field

• The desired confidence level that spares will be sufficient to cover the number of failures in field

The Frade Spares Analysis Tool uses Poisson analysis and all the input data above to determine the
optimal spares stock level to support operations.

Failure-Spare matrix and Cost-Benefit Analysis

The Failure-Spare matrix is a method used to list out all possible failure and spare holding combination
scenarios with the potential outcome (value gained from field). Cost-Benefit analysis is to compare the
potential gain with the cost of buying and preserving spares.
The additional input required for performing Failure-Spare matrix cost-benefit analysis are:

• Oil price (changes with market demand)

• Production rate

• Unit cost of spare

SPE-187452-MS 5

• Costs associated with storage and preservation of spares

Presentation of Data and Results

Based on the above, the Spares Analysis Tool was developed, which uses Poisson distribution, Failure-
Spare matrix and Cost-Benefit analysis to calculate the recommended number of spares. This tool allows
the subsea team working on Frade to be able to quickly evaluate the proper stock level of key components
and ensure continuity of operations in a safe, reliable and cost effective manner.

Input data
Package name: Subsea control module (SCM)

1. The reliability of the package, expressed as MTTF in years 1/λ 15

2. The number of packages in field n 16
3. Period to be supported, i.e. the resupply time, in days t 250
4. The desired confidence level, CL 90%
5. The cost of buying an item, in USD a 1,617,000
6. The cost of preservation the item per period (% of the buying cost) b 5%
7. Average production per well per day (barrels) c 2,582
8. Price of oil, in USD per barrel d 40

Reliability data (MTTF) can be taken from OREDA, but can also be data from the field, if available. The
number of packages should reflect what is currently installed in the field. In case field expansions are being
planned for, the expected number of packages should take that into consideration. Preservation cost can be
estimated using data from previous maintenances, or data from the vendors performing the maintenance.

Output data and results

Once the input data is completed, the output and results are automatically updated and displayed. The
probabilistic analysis result is demonstrated in Figure 1, using the input data above, which indicates that the
minimum number of spares required to meet a confidence level of 90% is to hold 2 spares.

Figure 1—The cumulative probability of having x number of failures (SCM example)

The cost-benefit analysis result is demonstrated in Figure 2 and Figure 3, using the input data above.
Figure 2 suggests that the total value gained increases significantly as the number of spares increase, peaks
at 2, and drops gradually as the cost of buying and preserving spares become higher than the benefit brought
by having the additional spares in stock. Most benefit is gained by increasing spares stock level from 0 to
1, nearly 12 million (as shown in Figure 3).

Figure 2—The total value gained by holding x' number of spares (SCM example)
6 SPE-187452-MS

Figure 3—Extra value gained by having one additional spare (SCM example)

Summary of the results:

1. The minimum number of spares required to meet the required confidence level of 90% is 2.
2. The maximum number of spares to reach the maximum potential of the field is 2, however most of
the value is gained by increasing spares holding from 0 to 1.

Sensitivity analysis - reliability

If the reliability of the module is changed from 15 to 8 years (MTTF), it is expected that a higher failure
rate would require a higher number of spare modules. The results are summarized below:
1. The minimum number of spares required to meet the required confidence level of 90% is increased
from 2 to 3.
2. The maximum number of spares holding to reach the maximum potential of the field is 3. Most of the
value is gained by increasing spares holding from 0 to 1, followed by 1 to 2 and 2 to 3.

Sensitivity analysis - re-supply time

The minimum number of spares required to meet the confidence level varies with the re-supply time: the
longer the re-supply period, the more spares are required, as demonstrated in Figure 4.

Figure 4—The minimum number of spares required changes with re-supply time (SCM example)

Sensitivity analysis - Oil price

The maximum number of spares required to maximus field production varies with oil price, the higher the
oil price, the more spares we should hold, as demonstrated in Figure 5.

Figure 5—The maximum number of spares required changes with oil price (SCM example)

Conclusions
The spares analysis tool that was developed assists with providing important data to the operations team
managing the subsea asset. The use of local, field specific data (such as failure rates, cost and lead time
for spares) has helped the Frade field reduce the LPO related to the lack of subsea spares. During the
development of the tool, a deeper understanding of the field limitations was obtained, and the operation-
critical spares were identified.
The current oil industry scenario requires operational costs to be reduced as much as possible. Presenting
key data to management when proposing to purchase critical spares was facilitated by the tool, as the cost
benefit analysis provides the full picture, considering not only the actual cost to purchase the spares, but
also the storage and maintenance costs, which are usually overlooked when making the decision to purchase
spares.
After using the tool for several months, further fine tuning was done to obtain more accurate results
and continue to reducing operational costs even further. It was noticed that the failure rates from OREDA
did not always represent the failure rates found on the Frade asset. Different manufacturers, operating
and environmental conditions play a major role and can considerably affect equipment reliability, and
consequently, the number of spares required to safely operate the field.
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Acknowledgments
Support from the ETC team in Aberdeen was paramount to the development of the spares analysis tool, as
well as determining a clear spares strategy for the Frade field in Brazil.