How the Petrochemical Industry Can Enhance Extreme Weather Resilience

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 United States and in 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

Figure 1 - U.S. Oil and Gas Facility Locations with Hurricane and Seismic Risk Overlay

Case Study: Arkema Plant Flooding

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; this reflects a monetary increase from $15.5B to $121.4B.

Figure 2 - (Source: The National Oceanic and Atmospheric Administration)

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 third-party experts can be extremely useful in quantifying actual risks. Engineering-based studies with rigorous site-specific technical assessments can be used to help facilities measure their actual exposure to various perils. In many instances, catastrophic risk insurance coverage for facilities is not based on a rigorous technical evaluation and lacks the fidelity to capture the true impact of natural hazard risk at the site. ABS Group works to understanding the specific vulnerabilities and consequences at each site, providing unique insights into quantifying and prioritizing risks as well as identifying specific mitigation recommendations.

Our Unique Approach to Natural Hazards Risk Management

Our team of experts are widely recognized throughout the industry for their contribution to the field of process safety, including the study of accidental hazards (fire, explosion, toxic). Coupled with our team of structural engineers with expertise in natural hazard risk management, we provide a unique and comprehensive single source offering for understanding risk related to potential large-loss events. Our services include:

• Risk Assessments and Independent Reviews/Audits
• Equipment Elevation Audits (flood risk)
• Natural Hazards Audit
  • Backup Power Systems
  • Supply Chain and Interdependency Reviews
  • Evacuation
  • Notification
  • Data Protection
• Flood and Storm Surge Risk Analysis/Mitigation
• Emergency Response Plan Review
• Emergency Command and Rideout Shelter Qualification
• Seismic Anchorage Analysis/Design
• Pre-Startup Review (PSSR)

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