An analysis of common causes of losses in the Oil, Gas & Petrochemicals Industries

Transcription

1 An analysis of common causes of losses in the Oil, Gas & Petrochemicals Industries Ron Jarvis. Swiss Re. Risk Engineering Services. London. 1

2 Introduction This presentation summarises the results of an analysis of 45 major losses in the onshore oil, gas & petrochemicals industry over the last 15+ years. Representing gross property damage/business interruption losses in the region of US$12 billion and insured losses in the region of US$9 billion. The intention is primarily to guide insurance risk engineers on those loss control areas to focus on during risk surveys. It supports the recent release of the Lloyds Market Association (LMA) guidance documents for risk engineering surveys developed by a small team of London-based reinsurers risk engineers. 2

3 Lloyd s Market Association (LMA) LMA represents the interests of the Lloyd s underwriting and claims community Provides a forum for members to seek solutions to operational and technical issues There are a number of LMA business panels representing the different classes of business within Lloyd s From time to time the LMA will publish model wordings for use by the market

4 Model Clauses/Wordings LMA Model Clauses - purely illustrative and distributed for the guidance of Members Underwriters are free to agree to different conditions/decide whether or not any contractual language is acceptable on any given risk LMA does not publish written guidelines with regard to application or intent of any specific contractual terms

5 Competition Law LMA Competition Law Guidance: The LMA (including all Business Panels and Working Groups) operate under strict Terms of Reference to ensure, amongst other things, compliance with Competition Law.

6 LMA Onshore Energy Business Panel Formed in September 2011 and consists of underwriters from Syndicates and companies writing onshore energy business within the Lloyd s and London market The scope includes onshore hydrocarbon production and processing but excludes power and mining risks The Panel meets on a monthly basis to consider a number of initiatives A Risk Engineering Sub-Group was formed to help develop a number of these technical initiatives e.g. Testing & Commissioning (T&C) clause LMA5197A released in 2014

7 Released Lloyd's Market Association (LMA) Documents KEY INFORMATION GUIDELINES FOR OIL, GAS & PETROCHEMICAL RISK ENGINEERING SURVEY REPORTS (LMA document reference OG&P IGSR 2015/001) GUIDELINES FOR THE EFFECTIVE CONDUCT OF OIL, GAS & PETROCHEMICAL RISK ENGINEERING SURVEYS Andy Goddard Talbot Syndicate London Patrick Davison - LMA LMA Onshore Energy Business Panel Other London-based Insurer Risk Engineers on the LMA Engineering Sub Group 7

8 Principles of the LMA GUIDELINES Risk surveys and insurance market reports A focus on process safety and loss prevention. An awareness of the common causes of losses in the industry. The importance of evidence-based risk engineering opinion. The effectiveness of implementation and compliance with site and best practice standards and procedures. Reporting of critical measures of process safety and loss prevention performance such as Process Safety Performance Indicators (PSPIs). 8

9 Common causes of losses - Methodology The focus was on primary, secondary and tertiary causes of losses (barrier model concept) an element of judgment was required Not a statistical analysis No attempt to identify root causes Instead the aim is to identify the most important risk control elements (responsible for most losses) that can be most easily assessed by a risk engineer during a typical 2-3 day risk survey of a refinery or petrochemical plant 9

10 Loss US$mm Large Property Damage/Business Interruption Losses Analysed US$mm (not adjusted for inflation) General Public Release Gross PD Loss Gross BI Loss Net Combined Loss Year 10

11 Losses Analysed - Type of Plant Terminal & Oil Gathering, 11% Upgrader, 7% Gas Plant, LNG, GTL, 18% Refinery, 47% Petrochemicals, 18% 11

12 Primary Causes of Losses Poor Design and/or inadequate Hazard Identification 7% Unsafe maintenance, equipment isolation & PTW Management 14% Failure of Operating Practices and Procedures 27% Mechanical Integrity Failure due to corrosion 52% 12

13 Secondary Causes of Losses General Public Release Unsafe maintenance, equipment isolation & PTW Management 7% Inadequate Management of Change 7% Lack of emergency Isolation valves 2% Mechanical Integrity Failure due to corrosion 42% Poor Design and/or inadequate Hazard Identification 33% Failure of Operating Practices and Procedures 9% 13

14 Tertiary Causes of Losses Mechanical Integrity Failure due to corrosion 11% Failure of Operating Practices and Procedures 8% Lack of emergency Isolation valves 31% Poor Design and/or inadequate Hazard Identification 16% Inadequate Management of Change 24% Unsafe maintenance, equipment isolation & PTW Management 8% 14

15 Mechanical Integrity Failure due to corrosion - causes General Public Release Inadequate equipment inspection programme 9% Incorrect materials or equipment or defect when installed 32% Inadequate piping inspection programme 59% 15

16 Mechanical Integrity Failure Primary Cause of Losses vs. Type of Plant Terminal & Oil Gathering 4% Upgrader 4% Gas Plant, LNG, GTL 13% Petrochemicals 18% Refinery 61% 16

17 Process Piping Inspection Programmes Approx. 40% of all major losses are primarily due to corrosion (mostly internal corrosion) of process piping. Areas to focus on are: Inspection programmes for corrosion of piping (comprehensive, vary TMLs, unexpected corrosion locations) The potential for unexpected rapid corrosion of piping or fittings caused by the installation of incorrect materials of construction during plant construction or subsequent maintenance or revamp (QA/QC) Positive material identification (PMI) during construction and maintenance work and a retrospective PMI programme of installed piping and fittings Ensuring that hard to access locations are not neglected in the inspection programme (TML selection) Corrosion under insulation (can be localised) 17

18 Failure of Operating Practices & Procedures Inadequate management of the bypassing and disabling of safety critical instruments (safety critical trips and interlocks) numerous losses where safety critical devices either not identified, not documented or not managed appropriately often bypassed for operational reasons but sometimes a legacy of design or maintenance formal disabling/bypass management system essential with risk assessment/mitigations, approval process, escalation, reporting safety critical devices list strong link to HAZOPs, LOPA, SIL, etc (perhaps we should develop bypass/disabling scenarios as part of these studies) PSPIs (SC devices status reports) provide feedback loop to senior management 18

19 Failure of Operating Practices & Procedures Emergency, "abnormal" or infrequent operating procedures Many losses during infrequent activities ASM Consortium root cause analysis of 70 incidents 57% of failures were during abnormal situations 90% of the "abnormal situation failures" were due to "Situation not covered", "Procedure not used" or "No procedure existed" 59% of the recommendations made were to address abnormal situations in procedures Ian Duguid (An Analysis of Past Incidents in the Process Industries) concluded that for those major incidents partly caused by "inadequate procedures", twice as many occurred during abnormal operation (maintenance, shutdown and start up etc) compared to normal operation. role to play here for HAZOP/HAZID studies (identify SC tasks & infrequent scenarios)? pre-commissioning walk downs might also provide an opportunity to identify SC tasks 19

20 Poor design and/or inadequate Hazard Identification Ensure that the status and follow up of recommendations is thorough and is monitored by senior management. The effectiveness of these studies to identify those hazards specific to the type of equipment which may not necessarily be provided on a P&ID. An independent review of the thoroughness of HAZOP studies may be of benefit. The identification of safety critical instrumented systems and devices (HAZOP/LOPA) and feed into operations, maintenance and inspection. Hazard identification of safety-critical activities to supplement the traditional P&ID HAZOPs (Task List/Procedural hazard reviews). 20

21 Unsafe maintenance, equipment isolation & PTW Management Safe isolation practices during maintenance and "non-standard" operator activities where a safe isolation permit to work might not be required. Special care when remotely operated valves are used to isolate for maintenance. The effectiveness of hot work permit system management 21

22 Inadequate Management of Change Changes made after HAZOPs have been completed (either prior to mechanical completion or during plant testing and commissioning) The thoroughness of hazard identification studies carried out under an MoC (including the decision process whether or not a HAZOP is necessary) and the follow up of recommendations 22

23 Lack of Remotely Operated Isolation Valves Ensuring that the site have an appropriate design standard and requirement for installing ROIVs in new plants and retrospectively in existing plants to enable loss of containment to be isolated quickly thereby reducing the size of the loss. 23

24 Main Causes of Losses - Summary 1. Mechanical Integrity Failure due to corrosion. 2. Poor Design and/or inadequate Hazard Identification 3. Failure of Operating Practices and Procedures. 4. Unsafe maintenance, equipment isolation & PTW Management 5. Lack of remotely operated emergency isolation valves 6. Inadequate Management of Change 24

25 Released LMA Documents KEY INFORMATION GUIDELINES FOR OIL, GAS & PETROCHEMICAL RISK ENGINEERING SURVEY REPORTS (LMA document reference OG&P IGSR 2015/001) GUIDELINES FOR THE EFFECTIVE CONDUCT OF OIL, GAS & PETROCHEMICAL RISK ENGINEERING SURVEYS A_bulletins/LMA_Bulletin_2013/LMA PD.aspx Oil Petrochemical & Energy Risks Association 25

26 - follow us on LinkedIn and continue the discussion via the comments box.. 26

27 27

28 Legal notice 2015 Swiss Re. All rights reserved. You are not permitted to create any modifications or derivative works of this presentation or to use it for commercial or other public purposes without the prior written permission of Swiss Re. The information and opinions contained in the presentation are provided as at the date of the presentation and are subject to change without notice. Although the information used was taken from reliable sources, Swiss Re does not accept any responsibility for the accuracy or comprehensiveness of the details given. All liability for the accuracy and completeness thereof or for any damage or loss resulting from the use of the information contained in this presentation is expressly excluded. Under no circumstances shall Swiss Re or its Group companies be liable for any financial or consequential loss relating to this presentation. 28