Risk-Based Inspection Program Best Practice – Executive Summary Justin Daarud Asset Integrity Program Consultant Lloyd’s Register Energy Canada Limited Calgary, Alberta Canada Lloyd’s Register Energy Americas, Inc Houston, Texas USA

Introduction – Justin Daarud Worked in Asset Integrity For Lloyd’s Register since 2007 Experience in both US and Canadian Regions Worked with Capstone and Lloyd’s Register in Asset Integrity on Asset Integrity Programs and Risk-Based Inspection (RBI) Programs Managed several programs in every phase (Design Based, New Construction, In-Service, End of Life) Specializes in Asset Integrity for Risk-Based Inspection Programs and Asset Integrity Program Consulting Account Manager for Several Clients Background in Consulting, Management and Mechanical Engineering

Agenda Understanding – What is a Risk-Based Inspection (RBI) Program Identified Failures of a RBI Program Critical Success Factors for a “Best Practice” RBI Program RBI Program Value RBI Program Components and Involvement Summary Questions

Understanding – What is a Risk-Based Inspection (RBI) Program?

What is Risk-Based Inspection (RBI)? “a risk assessment and management process that is focused on loss of containment of pressurized equipment in processing facilities, due to material deterioration. These risks are managed primarily through equipment inspection.” American Petroleum Institute (API) RECOMMENDED PRACTICE (RP) 580 SECOND EDITION, NOVEMBER 2009

RBI Program – From API RP 580 Management Process Source – Directly from API RP 580, Second Edition Nov. 2009, Page 30

Risk is the Product of Two Parts Risk is a measure of BOTH PROBABILITY of a failure AND CONSEQUENCE of a failure

Typical Risk Matrix Probability Ranking Consequence Ranking A B C D E HIGH MED HIGH MEDIUM LOW 1 2 3 4 5 Probability Ranking Consequence A-Catastrophic B-Very Serious C-Serious D-Significant E-Minor Probability 1-Very High 2-High 3-Moderate 4-Low 5-Very Low

Consequence and Probability for Risk-Based Inspection RBI focuses on a particular risk: The risk of a loss due to the loss of a pressure boundary by inspectable causes Possible consequences: Injury/fatality (safety) due to a toxic or flammable event Environmental damage Production Loss Minimal impact (this is considered)

Risk is Time-Dependent Next Year Today Risk, Events per Year Time, t

What’s RBI All About? Using Inspection to Manage Risks Unacceptable Risk/POF Inspect and fix if needed Probability of Failure The red line represents the acceptable level of risk/POF Time Inspection Interval Risk-Based Inspection is Proactive – It Utilizes the Information Available to Manage Risk Time-Based Methodology is Read and React

Identified Failures of a RBI Program So….an RBI Programs are in place…..Are they working? What kind of RBI Program failures are expected?

Identified Failures of a RBI Program Please note: Client = Operator, Vendor = RBI Consultant/Services Organization No Structured Approach to a RBI Program (Client/Vendor Issue) The RBI Tool Implementation is completed by unqualified personnel and management (both Client/Vendor) and it’s “Check the box” Once RBI Tool is Implemented, Client is Expected to be an “Expert” No Operational Documentation – Specifically for the Sustain Phase No Transition or Change Management Process from Time Based to a RBI Program Failure to Measure Value and Results = Failure to Continually Improve Inconsistent RBI Methodology Poorly Executed Sustain Phase due to lack of Expertise ….and so on…..

What do the Failures tell us about the RBI Programs? No Structure for the RBI Program, including the Program itself and the Operation Lack of Expertise and Experience No Partnership between Client and Vendor The Components of the RBI Program are Weak or Nonexistent No Feedback of Value or Key Performance Indicators (KPIs) What can be done about this to make sure the RBI Program is a Success AND a Best Practice?

Five Critical Success Factors for “Best Practice” RBI Program Successful RBI Tool Implementation Develop Operational Documents Execute a Transition Phase Establish a Training Program Sustain and Review RBI Program

Other Key Information to Achieve Best Practice Each RBI Program should have Four Phases Implement Transition Sustain Review/Measure Client / Vendor Partnership MUST exists for Each Phase Client / Vendor Involvement Changes throughout each Phase These be considered one Dynamic phase

Graphic of the Critical Success Factors to a Best Practice RBI Program with Phases and Involvement

More Information about each of the Five Critical Success Factors of a Best Practice RBI Program

1. Successful RBI Tool Implementation Successful RBI Tool (e.g. Software) Implementation – planned and coordinated via a Vendor-Client partnership, and executed by the Vendor. The Implementation Phase is considered the selection, installation, and deployment of the RBI Tool to facilitate the RBI Program. It is a requirement that this phase is completed with a defined scope including the most accurate information as possible. It is assumed that this Phase is conducted by qualified and experience personnel with the Vendor. Consequence Ranking A B C D E HIGH MED HIGH MEDIUM LOW 1 2 3 4 5 Probability Ranking

2. Develop Operational Documents Develop and Implement Operational Documents for RBI Program during the Implementation Phase for Program Sustainability (Evergreening) – coordinated via a Vendor-Client partnership. The RBI Operational Documents are Processes and Procedures that guide and enable Business Units and Operators (users) of the RBI program to achieve best practice results. Following the development of these documents, the Client must train and execute the operation of the RBI program defined by these documents.

3. Execute a Transition Phase Execute a Transition Phase from Implementation to Sustainability (Evergreening) and Review Phases – coordinated via a Vendor–Client partnership. The Phase transitions the RBI Program to Sustainability and facilitates Client resource development. The Vendor is an operational consultant for the RBI Program, and provides resources, training, support, and guidance to provide value to the Client.

4. Establish a Training Program Establish and Implement a Training Program – This action is planned and initiated by the Vendor and executed jointly through the Client and the Vendor together. This propels the Client into the Sustain Phase. This program builds the Client’s expertise in execution of the RBI program through the tool and operational documents of the RBI program in preparation for the Sustainability and Review Phase. Establishing this program ensures that the Client resource expertise is developed at a sustainable level.

5. Sustain and Review RBI Program Sustain and Review the RBI Program by measuring Key Performance Indicators (KPIs) – coordinated via a Vendor-Client partnership. This Sustain and Review Phase dynamically updates the RBI program with fresh results and measures the RBI Program with KPIs. KPIs such as dollar value savings and risk level reduction are used to indicate progress towards achieving best practice as well as providing value-visibility to management.

Value Gained Through RBI

Value of RBI Program Time Based vs. Risk Based Inspection Intervals Potential Savings in Percentage Risk-Based Inspection Intervals for Assets can exceed Time Based Inspection Intervals by GREATER than 2 times the length With RBI Assessments, each Asset can reduce inspection costs and mechanical integrity related down times by at least HALF the costs The chart indicates the potential savings of Assets with Risk-Based Inspection assessment intervals For One Alberta Facility – This can equal up to $10M in Savings over several years!

Overview of the Components of a RBI Program

Typically There are Three Base Components for Each Phase of a Best Practice RBI Program Components for Each Phase – Tools, Process/Procedure, and People are Required Thus to fill those components with the best solution, Vendors and Clients must work together The Four Phases Tool People Process/Procedure

Why is a Client / Vendor Partnership Important? Where Experts and Processes are not available – Each party can supplement each other!

Client / Vendor Involvement Best Practice Involvement Typical Involvement

Summary Understanding – What is a Risk-Based Inspection (RBI) Program Identified Failures of a RBI Program Critical Success Factors for a “Best Practice” RBI Program Successful RBI Tool Implementation Develop Operational Documents Execute a Transition Phase Establish a Training Program Sustain and Review RBI Program RBI Program Value RBI Program Components and Involvement

Overview of Lloyd’s Register Energy Services Asset Integrity Consulting – All Phases Risk-Based Inspection Consulting RBI Software Consulting Engineering Consulting Fitness for Service, Integrity, Failure Analysis, etc Complex Analysis Corrosion Engineering Process Safety Management Services HAZOP, HAZID, LOPA, SIL – Studies Human Factors Drill Rig Inspection and Inspection Workshops Project Management Consulting Pipeline Integrity Risk and Consulting