Interview with Abdulla Karaev, Director of Gazprom Neft Logistical Support and Capital Construction Directorate
March 2011. FSU Energy (Argus Media)
The shift to production of higher quality oil products requires that Russian oil companies upgrade and construct new production facilities in the next 5-10 years. Therefore, the search for the answer to the question "How can we save on construction?" becomes an especially important issue for them.
Production facilities that are built in Russia, with all things being equal, now cost more than similar facilities in the West. One of main reasons for this is safety management which differs fundamentally in our country from safety regulation at production facilities abroad.
This conclusion was drawn by Gazprom Neft after careful investigation of the matter. The company proposes to change dramatically the safety management philosophy for construction and operation of oil refining plants and has already submitted its concept to the Ministry of Energy.
Abdulla KARAEV, Director of OJSC Gazprom Neft Logistical Support and Capital Construction Directorate, told Vertical about why and how the existing system should be changed.
Ed.: What kind of a safety management system for oil refining plants is implemented in Russia now, and in what way does it differ from the western one?
A.K.: The fact is that the existing safety regulation system in our country was established in 1940s-1950s, when we purchased equipment for oil refining complexes abroad. The operating instructions for this equipment provided the basis for existing regulatory documents regarding safety of production facilities.
Although all the world has long since switched over to modern solutions and methods, we still continue to design refineries in compliance with the old regulations which have now not been radically changed for half a century.
From the viewpoint of safety, construction of production facilities in Russia is governed by about 500 regulatory documents at the present time. These are strict and directive documents which do not allow customers to make rational decisions and provide high-quality performance of facilities throughout their life cycle.
In our country, a facility is considered to be safe if it complies with legislative requirements. Think, for instance, of the need for tank farm construction. It is clear that if one tank ignites, there is a risk that the adjacent tank will catch fire too. In Russia, there is a stringent instruction to prevent such risk: it is necessary to provide the minimum distance between tanks specified by the standard. If this requirement is complied with, the facility is safe.
What is done in the West in such a situation? When designing a facility, the customer can place tanks closer to each other, but in this case a state-of-the-art fire-extinguishing system is installed.
Thus, safety is provided by compensatory measures rather than by compliance with specific instructions. In this regard, facility safety can be confirmed if a minimum permissible level is ensured for such parameters as injury rate, accidents, etc.
We have performed a comparative analysis of safety indicators in Russia and abroad and discovered that such parameters as accident rate and injury rate in our country are more than three times higher than in the West. This means that despite the fact that we have more stringent legislation, this does not ensure proper efficiency in the matter of facility safety.
With a switchover to a new system, Russia will be able to decrease significantly occupational accidents and injuries, getting closer to world standards.
Ed.: To what extent does our facility construction economics differ from that in foreign countries due to different safety management systems?
A.K.: Our facility is a priori more expensive for several reasons. First, it is due to architectural and planning solutions. Because facilities under construction cover a greater area, more concrete and other construction materials are consumed. Also, the need to observe standard distances between facilities leads to an increase in the usage of metal structures, tubular goods, cables, etc. Second, we apply more stringent regulations with regard to redundancy, and therefore excessive technical requirements envisaged by the Russian legislation often contribute to cost escalation.
Preliminary calculations indicate that the area for placing facilities of a particular unit at a Russian refinery is approximately 150×300 meters. In the West, a similar unit occupies 75×50 meters. Accordingly, we have estimated that the capital and energy intensity of oil-refining facility construction in Russia is some 30% higher than abroad.
For this reason, we want to create a system that will make it possible to provide an adequate level of facility safety not by observance of regulations, but by achieving the final objective - the construction of safe facilities. Revision of existing standards will allow not only a reduction of the injury and accident probability level, but also the cost of projects, we think, by one third
Ed.: How will the new system be put into life? Does legislation need to be changed?
A.K.: The philosophy of legislation should be changed. This question was discussed at the meeting of the Committee on Modernization and Technological Development under the chairmanship of President Dmitry Medvedev in March of last year. Following the results of the meeting, an instruction was given to submit proposals on improvement of the regulatory and legal framework in the design, construction and operation of fuel and energy sector facilities, primarily oil and gas processing plants, as related to a change of existing safety requirements by October. Studying foreign experience and current trends of technology development toward provision of the required industrial safety level was encouraged.
Gazprom Nest has prepared the corresponding proposals and forwarded them to the Ministry of Energy.
The concept of the switchover from directive safety management to a goal-setting one has already received preliminary approval. This is a substantial document, in the development of which we have involved consultants and specialized design institutes, including those in the West.
As the switchover requires both organizational and technical arrangements, we propose the introduction of new standards from 2015. And the remaining time should be spent on bringing all necessary regulatory enactments into compliance with the new requirements.
By July 1, 2011, we want to create a new regulatory document which will form the basis for the shift to the new system. The working title of this regulation is "About Safety of Designed, Constructed and Operated Facilities of Oil and Gas Processing, Petrochemical and Gas Chemical Plants". It is now being discussed, and the responses are generally positive; in particular, we are supported by the Ministry of Energy.
Because the new industrial safety regulation system assumes a radical change of supervision methods, we will continue to work with the supervisory agencies.
It should be noted that if Rostekhnadzor's inspectors, checking facilities for their compliance with regulatory requirements, now verify wall thickness, distance between tanks, number of stand-by pumps, etc., after the switchover to the new system, they will have to analyze the risk assessment method and supervise compensatory measures proposed by companies.
Therefore, a single, scientifically grounded procedure of safety assessment has to be created in the industry at the stages of facility design, construction and operation.
Ed.: Everyone – designers, builders and equipment suppliers – will have to readjust. To what extent are they ready for change?
A.K.: Of course, the new system will complicate the work of the whole chain. To a lesser extent with regard to builders, because it makes no difference for them how to build. It is quite a different story for designers. Now, they design facilities relying on, conditionally speaking, existing standards. In new conditions, however, together with the customer, they will have to offer a technical solution that will ensure the required level of industrial safety.
The question is to what extent our design institutes are ready for the reforms. Some institutes assure that they are ready, others feel more comfortable to work in existing conditions.
We believe that a four-year transition period is quite sufficient for the readjustment, by training personnel etc.
As far as furnishing with equipment is concerned, I am sure that use of the new approach to safety regulation for construction and operation of oil refining plants will stimulate the development of mechanical engineering, instrument making, electronics and other related industries.
In other words, it will create a natural demand for the latest equipment, such as high-tech pumps, instruments, automation equipment and fire-extinguishing facilities. Russian enterprises are currently mostly oriented towards release of metal structures, concrete, etc., although we are striving for oil industry modernization.
Ed.: Will domestic equipment producers have time to readjust, taking into account that they are behind their western competitors in terms of technological development?
A.K.: Yes, imported technologies and products may have to be used at first.
But we have four years in reserve, and this time can be spent creating new plants or joint ventures.
In addition, Russian products are quite competitive on the market. This is confirmed by 2010 results: more than 90% of Gazprom Neft's purchases is represented by domestic equipment.
Only in exceptional cases, we purchase local submersible equipment for the producing block from Baker Hughes and Schlumberger. In 96% of instances, we use equipment manufactured at Russian plants Borets, ALNAS and Novomet. Moreover, these plants are developing, and I think that import substitution will only increase in the nearest future, even in such a segment as electrical submersible pump units.
Gazprom Neft uses imported equipment primarily in oil refining.
From abroad, we purchase sophisticated pumps which are not manufactured in our country, and also compressors if Russian equipment manufacturers cannot provide the consumer properties that we require. In addition, we buy foreign enterprise management systems.
In our opinion, having created steady demand in current high-tech equipment and materials, the new safety regulation philosophy may become one of the elements of the modernization of domestic industry.