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Downstreamexposuresarecommonintheenergyindustry,alessonthathasbeenreinforced by recent pipeline spills and refinery damage caused by recenthurricanes.Thissessionwilldiscussdownstreamexposuresfromacasualtyriskengineering perspective. It will examine the public, products, and pollutionliabilityexposuresassociatedwithcasualtycoveragesusingvariouscasestudies,aswellasdiscussemergingriskissuesinthedownstreamsector.
Jon is a chartered mechanical engineer with over 20 years post-chartered experience and a technical background in fluid mechanics. Jon currently heads up XL Catlin’s Casualty Risk Engineering Energy & Construction group. In this role he supports the casualty underwriters, responsible for a wide range of liability risk assessments in the upstream, midstream, downstream,utility and construction sectors. Prior to joining XL in 2006, Jon was a Principal Mechanical Engineer with Entec UK, working as a project manager and lead mechanical engineer on major pumping and pipeline related capital projects.
Crude refining is the processing of natural or synthetic crude oils into finished petroleum based products
Downstream processing may also include other facilities e.g. upgraders
• 650 refineries worldwide (140 in US)• Sizes varies from <10,000 bpd to >1,000,000 bpd• Processing dependent on oil type, throughput and refined product
demand
So, individual process units may be similar, but capacity / combinations are unique
What factors might influence public and products liability exposures?
• Size and type (Complexity)• Age• Storage inventory• Proximity to third parties and watercourses• Layout• Approach to operational safety and risk management• Product type • Policy coverage / attachment point
• Barrels per day ‘capacity’ is considered good metric – reasonable correlation between size and exposure. May be preferable to ‘throughput’
• Extensive secondary processing (High Nelson Complexity) may increase inherent exposure due to greater number of units. Unit types are generally considered a minor factor – with one exception…
• Presence of Alkylation facilities does increase inherent liability exposures due to toxic cloud potential (high severity exposure)
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Alkylation
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Why is Alkylation a heightened exposure for liability?
• Alkylation involves bulk storage and use of either sulphuric acid or HF – both toxic (HF IDLH=30ppm)
• Impact radius of HF toxic cloud can be much greater than that of VCE (>10 miles)
• Industry has reasonable safety record but clear potential for high severity incident
- 1987 Texas City release (30,000 lb HF) resulting in 100 persons being hospitalised and subsequent class action- 2012 Hubi Chemical Plant, South Korea release (16,000 lb HF) 5 fatalities, thousands of minor injuries from inhalation offsite
• Appropriate risk mitigation measures should be in place e.g. release modelling, inventory dumps, leak detection, water sprays etc.
Age• Not a major factor for liability providing reasonable approach to
integrity management• Likely elevated exposure from older pipework, tanks and vessels constructed
to less robust standards
Storage Inventory• Tank farms present a clear sudden & accidental pollution exposure• Inventory, watercourse proximity and approach to containment all influence
liability exposures
Plant Layout / Operational Safety• Use reports / opinion from PDBI underwriter / broker reports• May need further information e.g. tank farm exposures• OHS and incident data can also give an indication of approach to plant
• Contaminated fuel can result in damage to customer facilities and engines - numerous cases / class actions
• Potential for very large loss (aviation) although multiple aircraft engine failure is rare. Helicopter gas turbine engine failure is more problematic and numerous cases of helicopter crashes caused by fuel contamination
• 3rd party storage facilities are more likely to be the cause of contamination than the refinery
• Fuel additives e.g. MTBE have led to significant pollution litigation against refiners
2005 BP Texas City Explosion after turnaround Isomerisation 15 fatalities / 100 injuries
2012 PDVSA Amuay Storage tank leak and explosion Propane tank farm 39 fatalities
2010 Tesoro Anacortes Heat exchanger rupture and explosion
Hydrotreater 7 fatalities
1998 Equilon Puget Sound
Explosion Delayed Coker Unit 6 fatalities
2008 Lyondell Basell Mobile crane collapse during turnaround
- 4 fatalities
1999 Tosco Martinez Pipe failure during maintenance Crude Unit 4 fatalities
2000 Mina Al-Ahmadi Condensate line leak - 5 fatalities / 50 injuries
1998 Equilon Enterprises Explosion after turnaround Coking Unit 6 fatalities
2016 ExxonMobil Explosion during maintenance Alkylation Plant (Sulphuric)
4 major injuries
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Anacortes (2010, 7 fatalities)• Explosion caused by failure of Naptha Hydrotreater Heat
Exchanger due to HTHA• During operation to put heat exchangers back in service
Texas City (2005, 15 fatalities, 105 injuries)• Ignition of hydrocarbons overflowing knock-out drum• During operation to refill Isomerisation Unit Raffinate Splitter Tower
Venezuela (2012, 48 fatalities)• Explosion caused by vapour cloud ignition from leaking pump• Many fatalities outside the site boundary (but close to LPG tanks)
San Juan, Puerto Rico 2009• Overflow and VCE• 300 homes and business damaged• Major fuel spill into surrounding watercourses and wetlands
Jaipur, India 2009• Transfer leak (hammer blind failure) and VCE• 12 fatalities, 200 injuries
Buncefield 2005 • Overflow and VCE• No major injuries• Widespread property damage• Groundwater pollution (mainly from PFOS in foam runoff)• £700m judgement against Total
PHMSA Pipeline Incidents: Count (1997-2016)Incident Type: Significant System Type: HAZARDOUS LIQUID State: ALL Offshore Flag : ALL Commodity: REFINED PP
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Major Refined Products Pipeline Incidents (US) Since 2010
• 29 spills since 2010 over 5,000 bbls in US• 10 of these were crude (dilbit); remainder LPG, Ethane, Gasoline etc.
• 9 spills since 2010 with property damage / clean-up cost over $25m• 7 of these crude; 2 gasoline spills
Crude is a more significant exposure for excess liability (including S&A pollution) than refined products even though enhanced bodily injury potential with non-crude. *
3 methods for pipe testing:- In-line Inspection- Hydrostatic Testing- Direct Assessment
• In-line Inspection preferable for in-service inspections
Key questions for ILI:-How much of the line is piggable?-What technology is used and how is the data verified?-What determines the need for physical excavation?
Refineries• potentially vulnerable to hacking of ICS / SCADA • Dec 2017, ‘Triton’ attack was the first example of hacking of a refinery
Safety Instrumented System• clear target to cyber terrorists • potential for hydrocarbon spill and VCE
Liquids Transfer and Storage• generally easier to rupture liquids pipelines than gas from ICS hacking• potential for causing overfill of tanks and resultant escalation / pollution
From Downstream perspective, main usage will be equipment inspections and monitoring:
• Pipelines• Steel structures• Tanks (internal and external)• Flares
Drone applications are generally considered to be positive:
• Reduce time and expense of inspections• Real-time monitoring and leak detection• Gain access to difficult-to-access areas• Reduce need for scaffolding • Reduce potential for bodily injury claims
In the US, the insurance companies of XL Group Ltd are: Catlin Indemnity Company, Catlin Insurance Company, Inc., Catlin Specialty Insurance Company, Greenwich Insurance Company, Indian Harbor Insurance Company, XL Insurance America, Inc., XL Insurance Company of New York, Inc., XL Select Insurance Company, and XL Specialty Insurance Company. Not all of the insurers do business in all jurisdictions nor is coverage available in all jurisdictions.
The information contained herein is intended for informational purposes only. Insurance coverage in any particular case will depend upon the type of policy in effect, the terms, conditions and exclusions in any such policy, and the facts of each unique situation. No representation is made that any specific insurance coverage would apply in the circumstances outlined herein. Please refer to the individual policy forms for specific coverage details.