Total cost of ownership (TCO) represents total expenditures linked to acquiring, implementing, utilizing, and retiring a product or equipment. TCO provides a comprehensive assessment of the entire lifecycle expenses associated with a purchase. TCO is typically used in the context of purchasing capital equipment and machinery.
Cost of Ownership vs. Purchase Price: Unveiling the True Value
Understanding the cost of a piece of capital equipment extends beyond the initial purchase price. Total Cost of Ownership (TCO) is like counting all the expenses linked to owning a car, covering repairs, fuel, and insurance. TCO, often overlooked, is vital for making informed decisions. For example, when choosing between a used and a new car, TCO considers more than just the purchase price. Although a used car may be cheaper to purchase initially , potential high repair costs could outweigh the savings compared to a new car with a warranty.
Why TCO Matters in the Gas Industry?
In major industries like natural gas and biogas, companies often hire “integrators”; third-party companies who purchase and integrate the needed equipment in one package. Integrators usually bid on projects. When the integrators win an integration project, they usually focus on finding the cheapest products to save money. Since integration companies will not operate the equipment, they do not have much incentive to think about operational costs after the initial purchase. However, this strategy will backfire for the end-user who is stuck with operating the equipment. Let’s get back to the old car example we had at the first of this article – you might save money initially, but the maintenance costs could be high. Owners, who are ultimately responsible for the bills, need to be cautious. There's a saying: "I'm not rich enough to buy cheap products." This emphasizes the importance of spending a bit more on high-quality products to avoid future issues.
In the context of the natural gas industry, analyzer users should be aware of the Total Cost of Ownership for the products. They should dive deeper into the quality of the products that are on the market and pick the ones that have the lowest TOC, which usually means high-quality.
In natural gas industry TOC should include different categories of costs, such as:
Calibration: Frequent calibrations are a major issue with most analytical measurements and analyzers. This problem becomes even more acute, if the calibration cannot happen in the field and when the analyzer or the sensor needs to be sent back to the factory for calibration. Of course, it would be better if instruments did not require calibrations.
Maintenance: Ongoing maintenance expenses are crucial considerations in TCO, preventing unexpected breakdowns and extending equipment life, contributing to the asset's overall longevity.
Reliability: While a more reliable asset may have higher upfront costs, it minimizes downtime and reduces repair expenses, making it cost-effective over time. An analyzer that is running only 70% of the time, is costing the user 30% more per useful operational time.
Accuracy: Wrong measurements have an actual cost for the user. These costs, depending on the measurement could be very significant.Investing in accuracy incurs initial costs but prevents costly errors.We will explore each factor in our upcoming posts.
ZEGAZ Instruments: A Cost-Effective Choice:
An often overlooked yet critical factor impacting Total Cost of Ownership (TCO) in the gas and biogas industries, is the implementation of analyzers that prioritize accuracy, demand less maintenance, create minimal disturbance, and showcase enhanced cost-efficiency at process levels. Dew point analysis, a fundamental process, identifies the temperature at which moisture condenses out of a gas mixture. Equally vital is the measurement of Hydrocarbon Dew Point (HCDP) in natural gas.
Traditional dew point analyzers encounter challenges distinguishing between moisture and hydrocarbon dew points, underscoring the pivotal role of TCO. In contrast, CEIRS™ technology, developed by ZEGAZ Instruments, may involve a higher initial cost but provides precise measurements of both dew points. This precision significantly reduces calibration and maintenance costs over time.
CASE STUDY : Moisture in Natural Gas
In case of moisture measurement let’s focus on the true costs of using an aluminum oxide sensor, a popular but not wise choice in the industry. Aluminum oxide sensors (aka Alux Ceramic Oxide) use an electrochemical process to detect moisture in natural gas. Although Alux sensors are a good choice for some applications (such as measuring moisture in ultra-pure inert gasses), they are not really appropriate for natural gas application.
Alux sensors have significant drift issues. They need to be recalibrated frequently depending on the quality of the natural gas. Most of the time, the sensors have to be sent back to a calibration company costing hundreds if not thousands of dollars. If the unit is not calibrated, the readings can have significant errors causing financial loss for the user.
By contrast, ZEGAZ CEIRS™ technology accurately measures the actual dew point of the gas. No guesswork, no calibration, with long-term stability and reliability. It is true that measuring the moisture dew point of natural gas requires a costlier analyzer than Alux sensors, but TOC considerations would point towards using it over an inexpensive Alux sensor.
If you are a user of analyzers and use integration companies to purchase analyzer packages, it is incumbent upon you to consider the choice for each analyzer that minimizes your TOC rather than the initial purchase price.
This integrated understanding facilitates more informed and cost-effective decision-making, emphasizing the long-term benefits of investing in advanced technologies for improved operational efficiency and financial prudence.