Methodology of life cycle cost with risk expenditure for offshore process at conceptual design stage Kiil Nam a, * , Daejun Chang b , Kwangpil Chang a , Taejin Rhee a , In-Beum Lee c a Industrial Research Institute, Hyundai Heavy Industries, 1 Jeonha-dong, Dong-gu, Ulsan 682-792, Republic of Korea b Division of Ocean Systems Engineering, Korea Advanced Institute of Science and Technology, 335 Gwahak-ro, Yuseong-gu, Daejeon 305-701, Republic of Korea c Department of Chemical Engineering, Pohang University of Science and Technology, San 31, Hyoja-dong, Nam-gu, Pohang, Gyungbuk 790-784, Republic of Korea article info Article history: Received 24 August 2010 Received in revised form 5 January 2011 Accepted 6 January 2011 Available online 12 January 2011 Keywords: Life cycle cost Risk expenditure Production availability Risk assessment LNG FPSO abstract This study proposed a new LCC (life cycle cost) methodology with the risk expenditure taken into account for comparative evaluation of offshore process options at their conceptual design stage. The risk expenditure consisted of the failure risk expenditure and the accident risk expenditure. The former accounted for the production loss and the maintenance expense due to equipment failures while the latter reflected the asset damage and the fatality worth caused by disastrous accidents such as fire and explosion. It was demonstrated that the new LCC methodology was capable of playing the role of a process selection basis in choosing the best of the liquefaction process options including the power generation systems for a floating LNG (Liquefied natural gas) production facility. Without the risk expenditure, a simple economic comparison apparently favored the mixed refrigerant cycle which had the better efficiency. The new methodology with the risk expenditure, however, indicated that the nitrogen expansion cycle driven by steam turbines should be the optimum choice, mainly due to its better availability and safety. Ó 2011 Elsevier Ltd. All rights reserved. 1. Introduction With depletion of conventional oil and gas fields, offshore installations have become complex and capital extensive, requiring development of new processes that should be able to operate satisfactorily and economically even for non-conventional envi- ronments. For example, the LNG FPSO is introduced to develop stranded gas fields that have been considered as uneconomical in the past. The installation needs gas purification and liquefaction processes which are completely new in the offshore industry though they are proven technology in the onshore LNG (Liquefied natural gas) sector. During the conceptual design of such a new process, the selec- tion of the best among the candidates is a formidable task due to the intrinsic features of offshore plants which are characterized by being unique, safety-critical, independent and subject to varying operating conditions. Each offshore plant is unique in that it should be designed so as to meet the site-specific conditions, the feed fluid characteristics, and the product specification. Safety-criticality stems from the hazards due to treating the flammable hydrocarbon materials in the limited and congested space. A list of common hazards in offshore plants includes fire, explosion, and dropped objects. Being independent implies that the offshore installations should produce such required utility as electric power, cooling medium and instrument air for themselves. Moreover, they should be able to protect themselves and the people onboard without external helps. The varying condition is another challenge over the life cycle ranging from 20 to 30 years. The well fluid composition and pressure change with production. The water injection for the enhanced recovery may cause the well fluid to be water-rich with the variance hard to anticipate. The finally chosen process should be superior to the others with all these features taken into account. The conceptual design should choose a process that is the best both in performance and safety. One of the selection criteria is the LCC (life cycle cost). This criterion claims that the optimum solution should have the minimum LCC. Conventional LCC methodologies are well developed to address the CAPEX (capital expenditure) and the OPEX (operation expenditure). Considering the intrinsic features of offshore plants aforementioned, a meaningful LCC analysis for the offshore plants should include not only the CAPEX and the OPEX, but also the production loss due to the equipment failure and the mishap caused by undesirable events. Like the risk- based design, conventional LCC methodologies provide accurate * Corresponding author. Tel.: þ82 52 2023236; fax: þ82 52 2509588. E-mail addresses: kiilnam@hhi.co.kr (K. Nam), djchang@kaist.edu (D. Chang), envchang@hhi.co.kr (K. Chang), taejin@hhi.co.kr (T. Rhee), iblee@postech.ac.kr (I.-B. Lee). Contents lists available at ScienceDirect Energy journal homepage: www.elsevier.com/locate/energy 0360-5442/$ e see front matter Ó 2011 Elsevier Ltd. All rights reserved. doi:10.1016/j.energy.2011.01.005 Energy 36 (2011) 1554e1563