Corrosion catastrophe?

2006 has been witness to several serious oil spills around the globe – and these leaks have rapidly escalated to a flood of concern as a growing number of experts call the condition of our major pipelines into question. In August, BP hit the headlines when it was forced to shut America’s largest oil field, Prudhoe Bay, after discovering severe corrosion in 16 miles of pipes that feed into the 800-mile trans-Alaska line. The news came hot on the heels of an earlier spill in March that led to BP revealing another three-mile segment of pipeline needed replacing.

Meanwhile, across the other side of the Arctic Ocean, Russia’s Druzhba oil line was experiencing similar problems. In July, pipeline operator Transneft was forced to temporarily close the Druzhba-1 line, which carries an eighth of Europe’s crude imports, following a spill on the Russian border with Ukraine and Belarus. Although the official investigation is yet to be concluded, initial reports suggest that with it dating nearly four decades old, advanced age and poor condition are almost inevitably to blame.

Such leaks are, sadly, an inevitability in this industry. However, for some, these recent incidents are the thin end of the wedge. A whole generation of oil infrastructure came on stream at the same time in the 1970s and there is concern that many of our other pipelines of this age may be as frail as those in Druzhba-1 and Prudhoe Bay. Internal corrosion is already the biggest cause of spills in the US this year, responsible for 16 percent of all accidents according to the US Department of Transportation’s Office of Pipeline Safety, while the portion of oil lost because the inside of a pipe has been eaten away has grown to 78 percent from 4.7 percent, with 68,624 barrels spilled this year. The statistics are likely to reflect a similar story for the rest of the world’s leading oil producers.

And certainly there has been great concern about the state of the pipelines in Russia. Chief Inspector for Russia’s Natural Resources Ministry, Oleg Mitvol, voiced his apprehensions after flying to the site of the Druzhba incident, where he suggested that 487 defects have been found in branches of the Unech-Polotsk pipeline in recent months. Interfax reported that Mitvol concluded: “According to the technical documentation we have received, in the current state, these pipelines can not be used.” It is not only the main pipelines that are cause for concern however.

“The so-called local pipelines, that run between the oil wells and points of concentration of collecting this oil, are in a very bad condition,” says Ivan Blokov, Campaign Director for Greenpeace Russia. “There are more than 20,000 leaks or breaks every year. The most recent statistics are from 2004, in which there were around 23,000 breaks in the local pipelines. In terms of the age of these pipelines, according to different sources it would appear that up to 50 percent of the pipelines are older than 20 years.”

The problem with aging fields and pipelines is twofold, however. One of the problems at Prudhoe Bay, for instance, wasn’t just that the pipelines were old, but that the lines were built for much greater volumes that were now being put through the system. “There are a lot of old, tired fields,” says David Webster, President of NACE International, the largest organisation in the world committed to the study of corrosion. “A 30 inch pipeline could have been ideal when the field came on production, but if additional production hasn’t been added after 20 or 30 years of operation, probably the line is too big. If the line is too big the velocity drops, and if the velocity drops you end up with more precipitation of by-products that are in there, and a much greater propensity for problems underneath that precipitate.”

Richard Pike, Head of the British-based Royal Society of Chemistry and a consultant to a number of energy firms recently authored an article in The Times stressing his concerns about the state of the world’s pipelines in the wake of major corrosion-related shutdowns of facilities. “Prudhoe Bay will shortly join a global list that has already grown significantly with major repair projects initiated in Russia, India and the Middle East, all driven by problems with corrosion,” he emphasised. This concern is understandable, for not only is the problem costing oil companies hundreds of millions of dollars to rectify, but it also has serious environmental implications.

Environmental and economic implications

At the time of the Druzhba incident, the Natural Resources Ministry initially estimated that at least 3200 tons of oil had spilled, and at least half of that had leached into nearby waterways. “Judging by information reaching the ministry from representatives of environmental organisations ... the consequences of the accident may be an environmental catastrophe in the region,” the Ministry’s first statement said. Transneft insisted that the figure was closer to one-eighth of the estimated amount and the Ministry later issued a second statement saying experts were “not disposed to call the accident ... an ecological catastrophe.”??

Oil spills occur regularly along Russia’s pipeline network according to Greenpeace Russia, with estimates suggesting that spills of 1000 tons of oil occur once every one to two years on average, while smaller accidents involving several hundred tons occur every two to three months. “Oil leaks cover huge areas which cannot be fully restored, particularly in the northern areas of Russia,” suggests Ivan Blokov, Campaign Director for Greenpeace Russia. “To fully restore an affected forest you need a few hundred years. Oil destroys it. Greenery may grow on the area in 15 to 20 years, but it is not a forest.”

There are also serious economic implications presented by a corroding pipeline infrastructure. America’s largest oil field, Prudhhoe Bay provided some 400,000 barrels a day output, roughly eight percent of the US’s total production, before the leak. Russia's Druzhba oil pipeline, feeds 1.2 million barrels to refineries in central Europe every day, an eighth of Europe's crude imports. And these are not isolated incidents of output being cut at major oil fields owing to corroding pipelines. With the world supply generally precariously balanced and readily available replacement reserves just not there, corrosion could have a major impact on oil prices. Barclays Capital Analyst Kevin Norrish recently estimated that repairs and replacement of pipes, etc. could push the price of oil from around US$70 a barrel today to US$93 a barrel by 2015.

Whitt Trimble, Principal Design Engineer at Fluor and NACE-certified Cathodic Protection Specialist who provides pipeline integrity services to the oil and gas and petrochemical industries, including work on Sakhalin Island, believes pipeline incidents will be more significant to the world supply in the future because the world oil supply increasingly comes from fewer – but larger – sources.

“Most of our projects now cost billions, provide tremendous amounts of oil, and rely upon one (or at most two) pipelines for transportation of the oil to the marketplace,” he explains. “The temporary loss of a single major pipeline will have substantial impact on the world markets. Older segments of the pipeline infrastructure also share this lack of redundancy. While even the most neglected older pipeline will be 80 percent in ‘good’ condition, refurbishing the remainder may require taking the pipeline totally out of service. Constructing a parallel pipeline for redundancy purposes can seldom be economically justified. So, operators will need to begin an aggressive maintenance, bypassing/refurbishment, and preventive patching/strengthening program (using welded and non-metallic methods) to extend the useful life of their aging assets.”

Corrosion management

One fact that the corrosion experts are keen to stress is that with proper corrosion control maintenance, decades-old pipelines can be productive and safe. As Trimble highlights: “There is no real correlation between the age of a pipeline and its condition…I've dug up pipeline valves after 40+ years of burial and they were in ‘like new’ condition.” In essence, despite concerns over the age of the industry’s infrastructure, there is no reason to assume that the pipelines are a ticking timebomb providing they have been treated with proper care. In the case of Prudhoe Bay, BP has already held its hands up and admitted that the lines in question hadn’t been ‘pigged’ in over a decade. It has subsequently been issued with a corrective order by the US Department of Transport, to develop a corrosion management plan in a bid to avoid a repeat of the incident.

Such a plan is a vital tool in the war against corrosion, and any operator serious about keeping pipelines in excellent condition should be making them a priority. “If you have a good system integrity plan you will have a methodology of determining what the situation is for your specific pipes – which pipe has the greatest risk because the velocity or throughput is low, for example, or what pipe is transporting particularly corrosive products,” Webster explains. “It would possibly address things like stress corrosion cracking and material defects and construction. But corrosion management plans are generally system specific. If you believe, for example, that you have a susceptibility to stress corrosion cracking then your management plan is going to include some way of monitoring the presence and/or absence of cracking. So the plan has to be tailored to the line.”

Pike insists that investors should be asking their Boards some important questions – and indeed the Boards in turn asking their senior executives – not least what their firm’s corrosion management process is. “Many on the receiving end of such questions will feel uncomfortable because corrosion is not on their radar screens,” he suggests. “This has to change.” Indeed, although oil companies are already spending huge amounts of money to combat corrosion and patch up pipelines, if they are to avoid any more major leaks, the industry will have to place corrosion higher on their list of priorities and ramp up their investments still further in the future.

Fortunately, the initial signs are that the industry is heeding the warning. BP has announced that it will spend between $15.5 billion and US$16 billion this year on maintenance and new oil and gas projects, up from a previous forecast of US$15 billion, whilst Shell has said its capital spending will rise 27 percent this year, up to $19 billion. Transneft, meanwhile, spends an estimated US$1.2 billion a year maintaining its network, replacing some 600-1000km a year. “Going at the rate we are now, the last station will have its upgrade completed 28 years from now,” Transneft President Semyon Mikhailovich said in a recent interview on the company's website, conceding that “It should have been yesterday.''

Perhaps with this growing level of awareness of the problem, a global pipeline disaster can be avoided in the near future. But it will, of course, demand a sustained effort from Russia and all the other oil and gas giants to finally tackle the problem of corrosion face on. “I would say that from an operator point of view, do a risk assessment to determine where you think you are going to have your problems, and monitor and deal with what you find – don’t stick your head in the sand,” concludes Webster. “The problem isn’t going to go away.”