How the petrochemical industry can enhance extreme weather resilience

NOTE: The sponsor of this content may contact you with more information on this topic. Click here to opt-out from sharing your email address with this sponsor. (This link will not unsubscribe you from any other BIC email list).

Natural hazard impacts

Disruptive impacts from extreme weather events often cause unplanned outages and economic loss from a lack of production. In addition, there are secondary and tertiary impacts tied to interconnected business services, including societal and environmental effects.

Many petrochemical facilities are strategically located close to coastal and inland waterways which makes them susceptible to hurricane and flood risks — especially those near the Gulf Coast, Atlantic Coast and Mississippi River. Earthquake risk is also a concern in a large western portion of the U.S. and other regions with known faults.

“Natural hazards can cause multiple and simultaneous releases of hazardous materials over extended areas, damage or destroy safety barriers and systems, and disrupt lifelines often needed for accident prevention and mitigation. These are also the ingredients for cascading disasters.” 1

Case study: Arkema Plant flooding

In August 2017, a 500-year flood event stemming from rainfall due to Hurricane Harvey caused failures in the power systems and ultimately disabled the refrigeration system at the Arkema plant in Crosby, Texas. The resultant fire caused a 1.5-mile exclusion zone to be established around the plant to allow for the burning of more than 350,000 pounds of organic peroxide.

A Chemical Safety Board (CSB) investigation resulted in numerous recommendations and the development of broad and comprehensive guidance to mitigate risk from potential extreme weather events, including:

  1. Facilities should perform an analysis to determine their susceptibility to extreme weather events
  2. Risk assessments should be undertaken to determine the impact of extreme weather events on process safety, ultimately endorsing a conservative risk management approach
  3. Critical safeguards should be in place for flooding events

As a result of the flooding at Arkema, the American Institute of Chemical Engineers (AlChE) published a monograph related to natural hazards and impacts on petrochemical facilities.

The increase of extreme weather events

Extreme weather events are generally defined by the frequency of occurrence, often expressed as a return period, and measured in hundreds of years. However, recent experience has shown these events are occurring with increasing regularity and severity. Recently, the definition for the 100-year and 500-year flood has undergone revision in Houston — an interesting development that experts are watching closely. According to Figure 2, the 5-year average cost (CPI-adjusted) from disasters has increased eight times between 1984 and 2020 — reflecting a monetary increase from $15.5B to $121.4B.

What is your tolerance to natural hazard risk?

Is your organization prepared to deal with plant closures caused by winter storms, severe thunderstorms and hurricanes (storm surge, flood, and high wind, e.g.)? The physical damage to buildings and equipment in petrochemical facilities is only the initial source of loss. Subsequent losses include lost revenue due to business interruption and market displacement.

Direct concerns include equipment reliability and resilience, worker safety and unplanned outages. Indirect concerns include storing materials and disruption to feedstock supply. In addition, logistic and transportation limitations (availability/access) will directly impact the market price as well as the cost and availability of energy. The readiness and resilience for extreme weather occurrences vary considerably across the industry. Ask yourself these questions:

  • What is the lost revenue in shutting down for an extended period for my petrochemical facility?
  • Can an additional understanding of the risks help my companies manage our operations?
  • Will supplemental physical hardening and/or improvements to preparedness and response reduce direct damage and limit revenue loss following a major event?

Currently, there are no regulatory drivers targeting industrial facilities that require them to withstand extreme weather events. The responsibility lies with each business and its individual appetite for risk.

Reducing risk and managing exposure to perils

Mitigation measures to reduce the potential for direct and business interruption losses include facility hardening, enhanced preparedness and response planning and organizational measures to limit the impact of any single event. Another option for companies is to buy adequate insurance — however, it is difficult to capture the true cost of long-term market disruption. Some companies elect to build risk into the cost of business, even planning for a certain amount of disruption due to extreme weather events throughout the year.

“In the chemical process industries, natural disasters are commonly thought of as “Acts of God.” However, the risks of such events can be diminished with the right planning and preparation.” 2

Independent risk assessments and audits by impartial and unbiased third-party experts can be useful in quantifying risks. Engineering-based studies with rigorous site-specific technical assessments can be used to help facilities measure their actual exposure to various perils.

A strategic approach to evaluating risk

Investment in today’s capital to mitigate future risks is a challenging proposition for any organization, especially when worst-case consequences are measured in tens and hundreds of years. Adopting a comprehensive and strategic approach to evaluating risk in response to climate change is necessary, and facilities can build resilience against the next calamity. Experts in this field can help organizations balance that risk and ensure that limited resources are allocated judiciously.

To learn more, visit abs-group.com.

1 Natech Risk Assessment and Management – Reducing the Risk of Natural Hazard Impact on Hazardous Installations – 2016

2 AIChE, CEP Magazine – Manage the Risks of Severe Wind and Flood Events – 2019

Tags