Climate Change Linked to Rising Risks of Unplanned Shutdowns



Oil & Gas IQ
11/18/2010

Shutdowns and turnarounds are a massive undertaking for companies within the oil and gas industry, requiring large amounts of planning at a very high cost.

Irving recently undertook a turnaround for scheduled maintenance at its Saint John Refinery, the largest facility of its type in Canada, which produces over 300,000 barrels of finished energy product each day.

The $72 million (£45 million) project involved builders and engineers working 24 hours a day for six weeks on several of the major processing facilities at the refinery including the #3 Crude Unit, #2 Rheniformer, the Fluid Catalytic Cracker and the Sulphur Plant. The project focused on cleaning, inspection, repairs and upgrades to piping.

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Yet, while these scheduled turnarounds disrupt production and represent a huge expense, the benefits far outweigh the possibility of an unplanned shutdown.

These can be bothcostly and dangerous, which is why avoiding such incidences is a key concern for the oil and gas industry.

Climate Change to Increase Unplanned Shutdowns?

Climate change could potentially threaten the oil and gas industry by causing damage to assets which, in effect, might lead to unplanned shutdowns.

A report released by IBM last year suggested that extreme weather conditions related to climate change could cause considerable damage to physical assets, many of which were designed to withstand historic climate conditions.

"Fluctuating temperatures can affect efficiency and performance of physical assets leading to transport disruption, damaged buildings and increased operational delays and costs," IBM said.

Older assets nearing the end of their lives were said to be particularly at risk from new threats including flood or erosion damage due to rising sea levels.

Some 76 percent of the companies involved with the IBM report highlighted that their physical infrastructure was likely to be damaged by extreme weather events.

To combat the increasing risks to assets, IBM recommended changing the frequency of maintenance and monitoring, as well as introducing new practices.

John Firth, chief executive officer and co-founder of climate change adaptation specialists Acclimatise, said, "It is difficult to justify the position taken by any company that fails to assess the vulnerability of existing and future assets to acute and chronic changing climatic risks, given the information we now have."

Effect of Unplanned Shutdowns on the Wider Industry

Unplanned shutdowns not only cause significant costs and disruption to the companies directly affected, but also have an impact on the wider industry.

In a recent example from the Philippines, the Bat-Man pipeline, owned by First Philippine Industrial Corporation (FPIC), was closed on October 28th, following the discovery of five holes leaking oil on the bottom of the West Tower Condominium.

Residents in the block have now asked for all 117 km of the pipeline to be checked to ensure its integrity and, in addition, are calling for the 40-year old infrastructure to be replaced.

FPIC said that it has now completed all repair works, but the Department of Energy must approve the repairs before the flow down the pipeline can resume.

However, as the pipeline is responsible for 50 percent of the country's demand for fuel, the shutdown is causing serious issues. The pipeline supplies Pandacan – the most important depot in the country which delivers to 2,000 stations, a number of these in Manila.

Shell and Chevron have both been severely affected by the shutdown, with the former warning that the pipeline is an "energy lifeline".

Roberto Kanapi, Vice President for Communications for Shell, said, " A continued shutdown of the pipeline is unsustainable...It is extremely urgent and critical for it to resume operations in order to ensure continuity of supply to the market."