This paper explores the application of LCC (Life Cycle Costing) concepts in the oil and gas industry. The paper details research into the development of a LCC model for using in SAP (System, Application and Products in Data Processing). Information held in the existing system in the oil and gas industry has been investigated in order to determine whether or not it is adequate to support LCC application for assets. The conceptual framework will develop the LCC technique as a tool to carry out costing analysis for new and existing systems. It will ensure that existing systems data are optimized for use in LCC applications and will investigate the feasibility of integrating the LCC model with existing systems. Based on this conceptual framework a LCC model will be developed.
The proposed system model provides a structural breakdown of cost (SBC) that can be applied to any asset at any level, such as super system, system, sub-system and equipment level in its lifecycle. The purpose of this SBC is to act as an aide memoir, as the starting point for developing a project/asset specific SBC that is tailored to the needs of a particular LCC requirement. The overview of SBC is provided to identify the data requirement for estimated cost element and provides a definition for cost element.
Consequently, if SAP-LCC is used for analysis at every, it is possible to identify the level that is the most significant in order to develop or reduce the cost in LCC at that level.