Corrosion is the process of destructive attack of metal by reaction with the environment.
This phenomenon has long been recognised by the insurance industry since property exposed to corrosion is an established exclusion from property insurance policies.
However, insurers do pay for any unexcluded damage resulting from corrosion.
Thus if a US$ 100 piece of steel piping fails due to corrosion we would not pay claims to replace the pipe section but could pay for resultant damage from explosions and fires which can reach hundreds of millions of US dollars.
That is the reason why OPERA has selected this topic for the seminar today and assembled a panel of experts on the subject relevant to Energy risk property insurances.
Recent Energy risk market experience includes the following major losses attributed to corrosion or a failure to use the correct corrosion resistant materials through error or lack of knowledge as a contributory cause.
|
Date |
Country |
Event |
PD |
BI |
TOTAL |
|
2002 |
Kuwait |
Fire |
150 |
|
150 |
|
2001 |
USA |
Fire |
50 |
300 |
350 |
|
2001 |
UK |
VCE |
80 |
200 |
280 |
|
2000 |
Kuwait |
VCE |
375 |
|
375 |
|
1992 |
France |
VCE |
260 |
242 |
502 |
|
1990 |
Saudi Arabia |
Fire |
39 |
28 |
67 |
|
1989 |
South Africa |
Fire |
23 |
75 |
98 |
|
1988 |
USA |
VCE |
350 |
|
350 |
|
1988 |
Norway |
VCE |
22 |
137 |
159 |
|
1984 |
Venezuela |
Fire |
86 |
|
86 |
|
1984 |
Canada |
Fire |
105 |
|
105 |
|
1978 |
Saudi Arabia |
VCE |
112 |
|
112 |
|
1977 |
Saudi Arabia |
Fire |
123 |
|
123 |
Corrosion is a major problem in any petroleum refinery, chemical process complex or utility plant.
Carbon steel is by far the most common structural material in Energy plants due primarily to a combination of strength, availability, relatively low cost, and resistance to fire.
The average refinery for example will contain in excess of 3,000 processing vessels of varying size, shape, form and function operating from vacuum to extremely high pressures.
In addition it will have many kilometres of pipe, from small diameter to one metre or greater, much of which is inaccessible for routine inspection, or because of the sheer amount of pipe, impossible to inspect.
Some of the pipelines are horizontal; some are vertical; some are up to 70 metres in the air; and some are buried under concrete, soil, mud and water.
Pipe diameters can range from 1 inch up to 30 inches and operate at temperatures from &endash; 162 deg C. up to + 900 deg C.
Carbon steel is suitable for most of this equipment except for the extremes of temperatures and pressures or aggressive environments. Often post weld heat treatment (stress relieving) is required to prevent cracking of the material in the highly stressed weld areas.
The chemically aggressive feed stocks like crude oil being processed will corrode the inside of vessels and pipes.
External exposures from very cold to very hot temperatures or humidity also contribute to very severe and accelerated corrosive conditions reducing metal thickness and plant life expectancies to a fraction of the normal.
Plants are aging, and "corrosion under insulation" is now becoming a growing concern, from both a cost and a risk basis.
Specialist alloy steels are used for applications that require superior properties to carbon steel, particularly when exposed to extreme temperatures in heaters and associated process units such as Fluid Catalytic Crackers and Ethylene plants.
These materials can cost up to 50 x the cost of carbon steels but will have an economic life with a reduced risk of failure in extreme conditions.
We will have presentations today covering the range of methods available to monitor corrosion and to ensure that all equipment maintains its design integrity to avoid catastrophic failures and subsequent fires and explosions.
The worldwide population of Energy plants presented to the London insurance market is inevitably getting older with many plants well into middle age.
For example, in the USA no new refinery has been built for over 26 years.
It is unlikely that any new grassroots refinery will be built in the U.S. in the foreseeable future because of the low return on capital invested due mainly to environmental standards compliance and the "NIMBY" factor.
The population of USA refineries has also decreased because of adverse economics but the on stream refinery capacity utilisation has moved to a current peak seasonal demand of nearly 99%, when 95% is considered a theoretical maximum industry standard.
This compares with an average plant utilisation rate in other industries of 82%.
Likelihood & Consequences of Plant Failure.
Energy plant management carry out many monitoring activities to reduce the risks from corrosion.
Traditionally, until some 20 years ago, this included shutting down the entire plant annually for the "Turnaround" or planned Maintenance and Plant Inspection programme for a work intensive 4 to 6 week period.
During this time virtually the entire plant would be dismantled and checked to confirm its integrity and ability to operate for a further year with no unplanned failures.
This process would also include comprehensive internal and external inspections of all vessels and piping, using the technologies available at the time, to check for corrosion and confirm the metal thickness still met the engineering design criteria to avoid any failure and loss of containment.
The inspection codes followed to do this work were intended to reduce the Likelihood of Failure LOF not the Consequences of Failure COF.
This approach was judged to be too costly in terms of inspection and maintenance resources but arguably gave insurance companies confidence in the quality of Energy risks.
The time period for planned "Turnarounds" has now been extended progressively up to a current industry "best performance" period of 8 years for some plants by the use of on stream metal corrosion monitoring devices using a variety of transducers and techniques.
Technology improvements are allowing more "non-intrusive" inspections to be conducted whilst the plant continues to operate.
The widely used standard thickness measuring probes can only function reliably up to a maximum material temperature of around 90 deg. C whilst even special high temperature probes have temperature limits of 400 deg. C making accurate measurements on operating Energy plants a very difficult problem.
Most plants now achieve well in excess of 4 years and are constantly striving to improve their "best performance" rating using all the latest techniques available including RBI.
Indeed some plants are only taking short outages (called pit stops) that are intended to be minimal stoppages (< 7 days) planned to do only the absolute minimum maintenance work to keep a plant operating efficiently and safely.
RBI has evolved over the last 10 years (In USA see A.P.I. 580, published this year) to improve the cost effectiveness of inspection and maintenance resources.
It is being applied as rapidly as possible in Energy plants worldwide with varying degrees of objectivity from an insurance perspective.
Significant cost savings are promised by concentrating inspection and maintenance resources on the selected areas of a plant that needs them most to maintain plant integrity.
This approach can obviously be manipulated to be budget sensitive rather than risk reducing because not all of a plant will be inspected.
As insurers who will pay for any losses if this approach fails, we have to be convinced that RBI is delivering an improvement in the insurance risk particularly for Energy plants past the first flush of youth!
BTI
21/10/02