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Economics of Risk Based Inspection Systems

in Offshore Oil and Gas Production

John L. Tischuk
Tischuk International/ABS Group

Conferncia sobre Tecnologia de Equipamentos COTEQ

Salvador Bahia
19 a 21 de agosto de 2002

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SYNOPSIS
Risk Based Inspection (RBI) is a method for using risk as a basis for managing an
inspection programme. Risk Based Inspection provides the ability to target
inspection resources at the areas of plant where inspection will provide the most
benefit in reducing risk. Risk is defined as the combination of the probability of
failure and the consequences of failure.
Tischuk Enterprises (UK) Ltd has developed an integrated software system based on
the Tischuk Operational Criticality Assessment (OCA) system of analysis. This is
designed to assess risk in a simple and cost effective way and is a fundamental part
of the development, implementation and management of risk based strategies. OCA
uses a 3 x 3 risk matrix to represent the different levels of risk.
Over the last thirteen years Tischuk Enterprises UK Ltd have worked closely with a
number of Operators, to implement Risk Based Strategies into their Inspection and
Maintenance philosophies, through the use of Operational Criticality Assessment.
These strategies provide techniques to re-determine both the frequency of
intervention and the applied inspection techniques. This has involved: 1) Preparation
of written schemes of examination; 2) A Plant Integrity review of the pressure
systems including assignment of grades and conditions to all of the piping and
pressure vessels; 3) An Operational Criticality Assessment of all piping and vessels
to determine consequences of failure, probability of failure and failure mode for
each item.; 4) Development of new inspection schedules and intervals and; 5)
Development of a review and feedback system so that inspection results may be
used to alter the subsequent inspection interval.
The application of Risk Based Inspection has an economic impact on Oil and Gas
production. The impact is generally positive but the outcome depends on the starting
point of the previous inspection programme.
1 - INTRODUCTION
Risk Based Inspection strategies are required by operators in the Oil and Gas and
Petrochemical Industries to provide the process for operators to function in
compliance with the regulatory authorities. The regulations put the onus onto the
operators to adopt a planned, systematic and auditable approach to a variety of
functions within their operations including, Inspection and Maintenance.
They clearly define the competence and the function of those bodies responsible for
inspection and test, and detail the procedure for Written Schemes of Examination,
and they move away from date based slavish methods of inspection which were
previously used.
The application of Risk Based Inspection Strategies, affords the opportunity for
operators to implement new methods for Inspection and Maintenance and
accommodates the increasingly stringent demands placed on industry reducing

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Standby Availability and reduction in plant downtime, both these reduce the
flexibility for shutdown and maintenance windows.
The objective of the inspection process applied is to ensure the integrity of the plant,
equipment and structures with a view to protecting the personnel and the
environment and to ensure that the company is able to safely continue its business.
2 - OPERATIONAL CRITICALITY ASSESSMENT
Operational Criticality Assessment is a system of analysis identifying the
Consequences of failure and Probabilities of failure for each inspectable plant item.
The system is based on operating conditions, process fluid composition, materials of
construction, design conditions and the plant history and uses a series of knowledge
based computer models and is delivered as an easily maintained database. The
Operational Criticality Rating is based on a 3x3 matrix using the Probability of
failure rating and the Consequence of failure rating, High criticality being 1 and low
criticality being 5.
3 - PROCEDURE ADOPTED BY TO ESTABLISH A REVISED
INSPECTION PHILOSOPHY USING THE T-OCA SYSTEM
.
a) Creation and Maintenance of an Asset
Register.
OCA

CONSEQUENCE

CRIT & GRADE

PROBABILITY

EXTENT
OF
INSPECTION

INSPECTION
FREQUENCY

INSPECTION
METHOD

Data is collated to form an Asset Register

which is a record file containing design and
operating details of all the pressure
containing equipment. The register needs to
be

INSPECTION
PLAN

properly maintained throughout the service life of the items since it the basis for
computing the Operational Criticality Rating and the resulting inspection strategy.
The Asset Register is subdivided by plant area or system and equipment type as
follows: Static Equipment including pressure vessels, tanks and heat exchangers;
Pipework; Relief Valves; Rotating Equipment and Control Valves.
b) Process Review, Definition of Pressure Systems and Initial Plant Integrity
Review.
An initial Plant Integrity Review of the Asset Register and a Process Review of the
operating conditions is carried out with plant process operations staff prior to the
data being loaded into the computer models. Pressure system definition and
identification is also agreed at this stage.
c) Assessment of Consequences of Failure.
The Consequences of Failure Rating uses eight criteria to calculate the rating value.
Commercial Impact (Standby Availability and Financial Exposure); Safety
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Impact (Location Effects, Fluid Hazard., Fluid Inventory, Pressure and Population)
and Environmental Impact (Environmental).
d) Assessment of Probability of Failure.
The Probability of Failure Rating is the highest probability calculated from models
and rules that evaluate the probability of failure by mechanisms appropriate to the
equipment type. The probability of failure models in the OCA system operate on
three levels: i) Measured rates of deterioration from inspection results ruled valid by
the Plant Integrity Review; ii) Predicted rates of deterioration based on industry
standard or plant specific calculation methods and iii) Handbook lookup tables. The
probabilities of failure identifies failure modes that shall be used to select
appropriate inspection methods to be included in the examination of each plant item.
These models are clearly defined by a series of flow diagrams giving visibility to the
decision process used by the computer models.
Failure modes used for Pipework and Static Equipment are detailed below: Internal
Corrosion; External Corrosion including Corrosion Under Insulation; Erosion;
Cavitation; Creep; Mechanical and Thermal Fatigue; Stress Corrosion Cracking;
Temperature Induced Embrittlement (hot and cold); Wet Hydrogen Cracking; Hot
Hydrogen Cracking and; Process Fouling.
e) Determination of Criticality and Allocation of Inspection Grade.
All inspectable items shall have a Criticality Rating determined and an Inspection
Grade allocated. From these an endorsement is derived, which is defined as a period
for which the Inspection Authority agrees that it is safe to operate the item, under
those operating conditions prevailing prior to the last examination. The date of the
last examination plus the endorsement derives the due date for the next examination.
Table 1 - Derivation of Operational
Criticality Ratings
Consequence of failure

Probability of
Medium
Low(3)
High (1) failure
(2)
3

High (1)

Medium
(2)

Low(3)

Allocation of Inspection Grade to Pipework

and Static Equipment.
To allocate the inspection grades previous
inspection and test data are reviewed
including routine condition monitoring data.
Vessels are graded 0-3 according to condition
reports and the history of thorough
examinations carried out under the
certification scheme.

The Inspection Grade is an indicator of the rate of deterioration and the reliability of
any predictions of deterioration. It is based on the Institute of Petroleum Model
Code of Practice.(IP 12 and IP 13).

Grade 0 ! Items for which: a) there is no historical evidence to predict its

service performance (including new items); or, b) the rate of deterioration is
high; or, c) the rate of deterioration may not be forecast from past data.

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Grade 1 ! Items which have: a) at least one previous examination at grade 0;

and, b) a moderate rate of deterioration.
Grade 2 ! Items which have: a) at least one previous examination at grade 0;
and, b) a low rate of deterioration.
Grade 3 ! Items which have either: a) at least one examination at grade 0 and
one examination at either grade 1 or 2; and, b) a low rate of deterioration with
a Remnant Life => Remnant Design Life and which may be forecast from past
data with confidence; or, c) a negligible rate of deterioration in a stable service
environment.
Items on grade 3 are to be subjected to a Plant Integrity Review at the half life
intervals, the purpose of which is to confirm that neither the operating nor
maintenance regimes have changed such that the rate of deterioration or its
predictability might have been adversely affected.
f) Inspection Plan Development.
The Tischuk OCA process offers three degrees of freedom in developing the most
appropriate inspection plan. The Criticality, in combination with the Inspection
Grade is used to determine the major inspection intervals. The Consequence of
Failure is used to derive the scope of inspection. The Probability of Failure identifies
the expected failure mechanism and is used to select the most appropriate inspection
or NDT method
I)

Determination of Inspection Intervals.

The Operational Criticality Rating together with the Inspection Grade of an item are
used to determine the inspection interval. The following table may be used as an
example where the interval periods are in months.
Table 2 - Derivation of Inspection Intervals in years for Pipework and Static
Equipment.
CRITICALITIES

GRADE
0

GRADE
1

GRADE
2

GRADE
3

CONSEQUENCE
S

1
2
3
4
5

2
2
2
3
3

N/A
4
4
6
N/A

N/A
N/A
6
8
8

N/A
N/A
8
10
12

H
H/M
H/M/L
M/L
L

DETERIORATION

HIGH

MEDIUM

LOW

NEGLIGIBLE

II)

Determination of Inspection Scope.

Inspection scope is determined by the consequences of failure. A detailed inspection

scope is assigned to items with a high consequence of failure. A general scope is
assigned to items with medium consequences of failure and a limited scope is
assigned to items with low consequences of failure

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III) Determination of Inspection Methods.

The choice of non-destructive inspection methods is based on the probability of
failure. Methods are chosen to detect the likely failure modes. Table 3 below is
shown as an example.
Table 3 - Supplemental NDT Inspection Methods
Failure Mode
Mechanisms
Internal
Wall Internal Corrosion/Erosion/
Thinning
Cavitation/Weld Corrosion
External
Wall External Corrosion/
Thinning
Corrosion Under Insulation
Cracking
Fatigue/Stress
Corrosion
Cracking/Wet
Hydrogen
Cracking
Other
Creep/Hot
Hydrogen
Damage/High Temperature
Embrittlement

NDT Methods
Ultrasonic/Radiography
Visual Inspection/Radiography
Thermography
Ultrasonic/Radiography
Magnetic
Particle/
Liquid
Penetrant
Ultrasonic/Radiography
Magnetic Particle

g) Plant Integrity Review.

One of the purposes of the Plant Integrity Review is to ensure that all data having an
impact on the Criticality Rating remains valid and that historical inspection and
maintenance data has been incorporated in the Probability of Failure Ratings.
The Plant Integrity Review serves to introduce new items into the Assessment
Register and to review the results of inspection and monitoring activities. The
purpose of the review is: 1)to identify any additions, changes or deletions to the
Asset Register; 2) to establish the actual condition of items and their fitness for
purpose; 3) to establish the observed deterioration mechanisms and rates and; 4) to
establish the level of confidence in the predictability of the deterioration rate.
4 - ECONOMIC IMPACT OF RISK BASED INSPECTION STRATEGIES
The application of Risk Based Inspection is having an economic impact on Oil and
Gas production. When analysing operational costs incurred, there is a tendency to
only consider the visible expenses, such as inspection costs, maintenance costs and
management costs, these direct costs only contribute a small fraction to the total cost
of operation.
A more representative analysis would consider, the costs of shutdowns, downtime,
lost production, unplanned failures, environmental issues, and regulatory
compliance, in addition to the visible expenses. Risk Based Inspection strategies are
targeted at reducing the seldom considered costs, effecting value added to the
operation.
Several case histories are detailed demonstrating the lifecycle value of Risk Based
Inspection Strategies.

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5 - CASE HISTORY 1
The first case history considers a North Sea Gas Terminal, with three pipelines and a
normal winter gas rate of approximately 45 million Standard cubic metres per day
(1.4 BSCF/day) supplying 15-20 % of the current UK demand. The objective of the
inspection process applied is to ensure the integrity of the plant, equipment and
structures with a view to protecting the personnel and the environment and to ensure
that the company is able to safely continue its business. The inspection philosophy
applied to the plant and equipment at the terminal has continuously evolved since
1978. Initially based on Industry standards, the inspection frequency was
prescriptive in nature and in some cases statutory, however a very thorough
programme of inspection was supplied giving a high level of reliability and
confidence. This has provided a sound basis for the application of the terminals
Risk Based Inspection Strategies, which have been implemented at similar costs to
the previous prescriptive regime. The terminal adopted a Risk Based Strategy based
on the Tischuk OCA system for revising both planned maintenance and inspection
philosophy for the Piping systems, Vessels and Relief Valves, in 1994 with the
following results:
1.
2.
3.

4.

5.
6.
7.

A reduction in inspection man-hours of 26% giving a cost saving of

48,000 per annum.
A reduction in associated inspection services and mechanical man-hours of
31% giving a cost saving of 145,000 per annum.
An increase in the periodicity of major intervention in most plant areas
extending from two yearly to three yearly for minor inspections and from
four yearly to six yearly for major inspections, providing a 30-40% saving
in plant downtime and production capacity.
A decrease in the length of intervention periods from 21 days to 10 days
giving an approximate saving in production capacity of 50%. At maximum
capacity this equates to 132 million standard cubic metres of gas
production.
A targeting of appropriate inspection techniques to most vulnerable plant
identified by the OCA analysis.
Application of alternative inspection techniques.
The re-determination of both frequency of intervention and applied
inspection techniques.

As a result of improved confidence in the condition of the equipment, the operator

has moved to the following non-intrusive and on-line methods of inspection which
do not have the same need to shutdown, purge or otherwise prepare the plant. The
alternative methods which may be initially expensive have associated potential
savings in downtime and service costs. By utilising these easily effected, less
invasive alternative methods of inspection for more frequent interim internal checks,
the requirement is reduced for full personal access. This involves isolation, purges,
mechanical assistance, scaffolds, insulation removal, and vessel entry preparations,
and the associated costs; it also allows the full intervention frequency to be
extended. This non-invasive methodology has the acceptance of the Health and
Safety Executive (HSE).

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Inspection equipment has improved significantly in recent years with much better
repeatability when using Ultrasonic and Eddy Current surveys. Developments in
remote visual inspection equipment and video image enhancement are being utilised
to internally inspect large vessels and similar voids with borescopes, and
videoimagescopes providing a very high image quality. On-line monitoring for
regular repeat scanning of Pipework where erosion is seen as a potential problem;
the use of thermal imaging to monitor Pipework insulation and Rotating Equipment;
and the use of Real Time Radiography to detect corrosion under insulation for small
bore pipework (Dia.<8). Vessel Inspection Plugs and Visual Inspection Ports are
used to provide suitable access, for Visual Inspection and Ultrasonic Thickness
Measurement.
Thus, from an initial investment of 80,000 for the implementation costs, it is
estimated over a 6 year period that there will be a 66% reduction in shutdown days,
equating to 480 million standard cubic metres of gas production, without
compromising safety and environmental issues within the terminal.
6 - CASE HISTORY 2
The second case history considers a UK Gas field which has an indigenous reservoir
of approximately 280 billion cubic feet of gas. It is also used as a mass gas storage
site. The field has a gas compression facility to enable gas to be pressurised and reinjected into the reservoir. When in production the platforms can deliver in excess of
1500 million standard cubic feet of gas per day. Changes in the gas industry have
reduced the flexibility and minimised windows for Inspection and maintenance. As
a result, the operator adopted a Risk Based approach for their Inspection Regime by
performing an Operational Criticality Assessment in 1995. The planned Inspection
workscope produced for the next 6 to 8 years utilises non-intrusive methods of
inspection and is systematically replacing the previous shutdown policy based on
the statutory requirements. This leads to a reduction in shutdown days and thus
value added to the cost of operation. The move to non-intrusive inspection methods
has been possible due to the relatively benign dry gas the field produces, and a high
level of confidence in the condition of the equipment and in the methods of
inspection employed. The inspection regime used will take advantage of any
opportunity driven shutdowns to augment the inspection techniques performed.
Results of a pilot Operational Criticality Assessment performed on the condensate
system, indicated that there would be annual savings in excess of 56,000 from the
inspection costs of the pressure systems, this being achieved by the following:
1.
2.
3.

a reduction of 70% in the level of Ultrasonic Testing.

an increase in the intervals of internal vessel Inspections, by an average of
20 months.
reduction in shutdown days providing additional revenue of 140,000 per
annum.

It should be noted however, that the shutdown costs for 1997 have indicated an
increase of 15% this was due to optimising the vessel inspection scheduling,
smoothing out the programme over the next six years.
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7 - CASE HISTORY 3
The third case history looks at a some process plants from a large UK refinery,
where Risk Based Strategies, through the use of Operational Criticality Assessment
have been applied for the last 5 years. The refinery employs a rolling four year
internal vessel inspection programme. By the application of Risk Based Inspection,
the number of vessels requiring internal examination has reduced in 90% of the
plants considered. Due to a recent extensive modification programme the hydro desulphuriser plant contained more vessels requiring internal inspection The
modifications have reduced the vessel inspection grade allocation, and thus
increases the level of inspection required. The refinery produces a net value of 2
million per day and has incurred costs of 300,000 to implement their Risk Based
Inspection Strategies which has achieved the following:
1.
2.
3.

a 27% reduction in shutdown duration has been achieved, by reducing the

number of vessels requiring intrusive inspection.
Equating to a net revenue gain of 2 million for each shutdown,
A reduction in shutdown costs of 1 million.

8 - CASE HISTORY 4
The fourth case history considers an operator with both new and mature North Sea
Oil and Gas Fields. Both financial and non financial benefits are being realised, by
applying Risk Based Strategies to inspection and maintenance philosophies. The non
financial benefits recognised by the operator have demonstrated commitment to the
health and safety of the workforce, and commitment to the governing regulations. It
is predicted that financial benefits will be realised in lifecycle inspection and
maintenance costs. Initially by reducing the number of internal vessel inspections by
50%-60% and then by continuous improvement, through risk based programmes, it
is anticipated that the inspection grade will improve, giving a further reduction in
costs of 33.3%, as the frequency between intervention periods is increased. These
figures are based on an average cost of 5,000 to shutdown, prepare and inspect a
vessel, and take no account of the additional value added by lost production cost
savings. The operator is currently achieving some of the financial benefits through
the implementation of their Risk Based strategies. A mature oil field producing 9
thousand barrels of oil per day has realised savings of 25 % in pipeline inspection,
and 41% in vessel inspection, giving a total cost saving of 70,000 from 1997s
inspection campaign. For new oil and gas fields producing 15 thousand barrels of
condensate per day, and 400 million standard cubic feet of gas per day, it is
estimated that there will be a reduction of 100,000 from 1997s Inspection costs,
by moving away from the previous statutory five year Inspection plan.

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9 - CASE HISTORY 5
The fifth case history considers a North Sea Oil field, producing 93 thousand barrels
of oil per day, and exporting 242 million standard cubic feet of gas per day. The
operator has adopted Risk Based Inspection strategies for its corrosion and
inspection management programmes. A five year strategy plan has been developed,
and through its implementation it is expected that the operator will realise the
following benefits. An estimated reduction of 1 million from 1997 inspection
costs, over a four year period, achievable by improving inspection efficiency and
utilising more appropriate methods of inspection. By utilising non-intrusive
inspection there is an estimated reduction in planned shutdown days for vessel
inspections, from the current five days per year to one day per year, leading to
revenue gain of 1 million per annum. An estimated reduction in unplanned
failure costs, from the current 2 million per annum, to zero over a five year
period, achievable if un-predicted failures are eliminated.
10 - CASE HISTORY 6
The final case history considers a new onshore Gas treatment plant, processing gas
valuing 8 million per day. Risk Based Inspection strategies have been applied to
produce a lifecycle inspection schedule, for its 30 year design life which minimises
production lost through inspection. By performing, as a first pass an Operational
Criticality Assessment, then a detailed HAZOP study on the high risk items, a nonintrusive inspection schedule has been determined for the treatment plant. An
extensive review of the material selection philosophy, determined that the materials
selected, were commensurate with maintaining the mechanical integrity of the plant
over its design life. It considered the damage mechanisms expected from plant
experiencing dry, sweet, gas conditions during normal operation. These conditions
reduce the potential for significant internal corrosion, and make a lifecycle nonintrusive inspection schedule feasible. This schedule will only be valid if the process
conditions are kept within the specified envelope.
A stringent, process monitoring and control programme is to be effected, identifying
levels of water content, carbon dioxide, hydrogen sulphide, chlorides, and organic
acids. The envelope and any significant process excursions are to be reviewed on a
regular basis. One planned inspection driven shutdown has been scheduled two
years into the operation. The results of the inspection are to be fed back into the
Operational Criticality Assessment via the PIR module providing an update of the
assessment. It is anticipated that this will be the only inspection driven shutdown,
throughout the design life of the plant. Considering the loss of pipeline tariff, if
inspection driven shutdowns are minimised there is a potential saving of 136,000
per day of shutdown. Therefore, if a three day shutdown is avoided there is a
potential net revenue gain of 408,000 per annum.

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11 - BENEFITS
By introducing Risk Based Inspection, the following benefits are being experienced
throughout the Oil and Gas and Petrochemical Industries:
A better understanding of the probabilities and consequences of failure leading to a
more effective means of control and surveillance; improved prediction of failures
giving enhanced safety, availability, reliability and a higher level of confidence in
the plant condition.
The application of the 80/20 rule, allows RBI principles to determine the relatively
few most critical items allowing significant increases in their inspection intervals
and a reduction in scope for many non-critical items.
The change to non-intrusive, on-line methods of inspection instead of the
traditional off-line methods has resulted in shorter and possibly less frequent
shutdowns, reducing direct inspection related costs and minimising lost production
costs, with associated reduction in permanent inspection manning.
A structured assessment utilising generic and historical data and sound engineering
basis for the revision of the companies inspection philosophy, providing a fully
auditable process reflecting regulatory compliance.
12 - CONCLUSIONS
The application of Risk Based Inspection through the use of Operational Criticality
Assessment is proving to be economically viable, providing both financial and non
financial benefits for operators.
Risk Based Inspection strategies have been successful, in reviewing the frequency of
interventions and the use of applied inspection techniques, for both planned
maintenance and inspection.
The adoption of Risk Based Inspection programmes allows both new and improved
alternative methods of inspection to be applied where suitable. For these strategies
to be successful inspection methods available require continual review leading to
progressive development utilising the most effective method of inspection.
13 REFERENCE
API RP 580, Risk Based Inspection, American Petroleum Institute, Draft #6, July,
2001
T-OCA 2000 Technical Training Manual, Tischuk International, Janeiro de
[1]
2001

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