Cost of NOT preventing corrosion in a gas pipeline – $ 4 billion!

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On June 3, 2008, there was a large explosion in a natural gas processing station on Varanus island near Western Australia. The investigation report that was released last week, points to poor maintenance as being the leading cause of the accident. It seems that the company that maintained the pipeline and associated infrastructure neglected maintenance for over 15 years, until the day , the pipes became so thin due to corrosion that the gas leaked and it all went off with a bang!

The report talks about the main causes of the blast as “ineffective anti-corrosion coating of a gas pipeline due to damage or disbondment of the pipeline”, “ineffective cathodic protection of the wet-dry transition zone of the beach crossing section of the pipeline,” and “ineffective inspection and monitoring by Apache.” (Apache Energy is the company that owns the installation).

Fortunately no fatalities were reported, but the resulting disruptions may have caused losses of up to $ 4 billion and there is a question mark on who is liable. Gas supplies to the entire Western Australian region were cut back by a third, resulting in shutdowns and outages.

If this is the callous way in which managements treat their assets in good times, ( the energy industry is having a pretty good time now), I wonder what will become of good maintenance and safety standards during tough economic times that are seen in the days ahead?

This is what happens when you let the bean counters and corporate finance guys run amok and ruin perfectly good manufacturing/processing companies. I am sure all of you- manufacturing, process and safety professionals who have experienced this will agree with me, as most of us have gone through similar experiences in the past few years.

The mantra of cost-cutting at any cost, has proved to be a BIG failure and is downright reckless and irresponsible behavior towards everybody-ordinary shareholders (NOT the ones who write ESOP checks for themselves) , frontline employees (NOT the fancy headquarters staff but those on the frontline who run the operations), the larger business community , the surrounding environment and local communities.  We have all seen the bean counters’ breathtaking, virtuoso performance on Wall Street by now, it is up to the engineers and technical types (who I suppose have far more IQ and common sense than their glamorous “corporate finance” types of guys) to take back control of companies and run things in a saner (and safer way).


Here’s a video of the original incident (from Live Leak)