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Tischuk Enterprises (UK) Ltd.

Page 1 of 1
ECONOMICS OF RISK BASED INSPECTION SYSTEMS IN OFFSHORE OIL AND GAS
PRODUCTION.

TITLE:-

Economics of Risk Based


Inspection Systems in Offshore
Oil and Gas Production.

AUTHOR:-

Susan Cushnaghan
Operations Co-ordinator.
Tischuk Enterprises (UK) Ltd
52 Regent Quay, Aberdeen.

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 ten 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.
2.
3.
4.
5.

Preparation of written schemes of examination


An authoritative review of the pressure systems including assignment of grades and
conditions to all of the piping and pressure vessels
An Operational Criticality Assessment of all piping and vessels to determine
consequences of failure, probability of failure and failure mode for each item.
Development of new inspection schedules and intervals.
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.

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tp1_economics.DOC
Prepared by Susan Cushnaghan.

22 Dec 97

Tischuk Enterprises (UK) Ltd.

Page 2 of 2
ECONOMICS OF RISK BASED INSPECTION SYSTEMS IN OFFSHORE OIL AND GAS
PRODUCTION.

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 Standby Availability and reduction in plant
downtime, both these reduce the flexibility for shutdown and maintenance windows.
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.
PROCEDURE ADOPTED BY TO ESTABLISH A REVISED INSPECTION PHILOSOPHY
USING THE TISCHUK OPERATIONAL CRITICALITY ASSESSMENT (OCA) SYSTEM
1.
2.
3.
4.
5.
6.
7.

Create an Asset Register.


Carry out Process Review, initial Authoritative Review and define Pressure Systems.
Determine Consequences of Failure.
Determine Probability of Failure.
Determine Criticality and Inspection Grade.
Define an Inspection Programme (Interval, Method and Scope).
Authoritative Review.

These steps are shown as a flowchart schematic.

OCA

CONSEQUENCE

CRIT & GRADE

PROBABILITY

EXTENT
OF
INSPECTION

INSPECTION
FREQUENCY

INSPECTION
METHOD

INSPECTION
PLAN

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ECONOMICS OF RISK BASED INSPECTION SYSTEMS IN OFFSHORE OIL AND GAS
PRODUCTION.

1) Creation and Maintenance of an Asset Register.


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 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:
1. Static Equipment including pressure vessels, tanks and heat exchangers
2. Pipework
3. Relief Valves
4. Rotating Equipment
5. Control Valves
2) Process Review, Definition of Pressure Systems and Initial Authoritative Review.
An initial Authoritative 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.
3) Assessment of Consequences of Failure.
The Consequences of Failure Rating uses eight criteria to calculate the rating value.
Commercial Impact:
1. Standby Availability.
2. Financial Exposure.
Safety Impact:
3. Location Effects
4. Fluid Hazard.
5. Fluid Inventory.
6. Pressure.
7. Population.
Environmental Impact:
8. Environmental.
4) 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:
1. Measured rates of deterioration from inspection results ruled valid by the
Authoritative Review.
2. Predicted rates of deterioration based on industry standard or plant specific
calculation methods.
3. 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.
The probability of failure 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 Equipmentare detailed below:

tp1_economics.DOC
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ECONOMICS OF RISK BASED INSPECTION SYSTEMS IN OFFSHORE OIL AND GAS
PRODUCTION.
1. Internal Corrosion
2. External Corrosion including Corrosion Under Insulation
3. Erosion
4. Cavitation
5. Creep
6. Mechanical and Thermal Fatigue
7. Stress Corrosion Cracking
8. Temperature Induced Embrittlement (hot and cold)
9. Wet Hydrogen Cracking
10. Hot Hydrogen Cracking
11. Process Fouling

5) 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

Probability of Failure
High
Medium
Low

High
1
2
3

Consequence of Failure
Medium
2
3
4

Low
3
4
5

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.
Grade 1
Items which have :
a) at least one previous examination at grade 0
and
b) a moderate rate of deterioration.

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Tischuk Enterprises (UK) Ltd.

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ECONOMICS OF RISK BASED INSPECTION SYSTEMS IN OFFSHORE OIL AND GAS
PRODUCTION.

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 an Authoritative 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.
6) Inspection Plan Development.
The Tischuk OCA process offers three degrees of freedom in developing the most
appropriate inspection plan.
x The Criticality, in combination with the Inspection Grade is used to determine the major
inspection intervals
x The Consequence of Failure is used to derive the scope of inspection
x The Probability of Failure identifies the expected failure mechanism and is used to select
the most appropriate inspection or NDT method
a) Determination of Inspection Intervals.
Piping and Static Equipment.
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

CONSEQUENCES

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

b) 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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Tischuk Enterprises (UK) Ltd.

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ECONOMICS OF RISK BASED INSPECTION SYSTEMS IN OFFSHORE OIL AND GAS
PRODUCTION.

c) 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
Internal Wall Thinning

External Wall Thinning

Mechanisms
Internal Corrosion
Erosion
Cavitation
Weld Corrosion
External Corrosion
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

7) Authoritative Review.
One of the purposes of the Authoritative 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 Authoritative 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
4. to establish the level of confidence in the predictability of the deterioration rate.
Equipment should be subject to an Authoritative Review to assess its current grade allocation
and endorsement when:
1. any Inspection Report is being prepared
2. significant changes have taken place in the operating conditions which could affect
the rate of deterioration
3. following an abnormal incident which could have affected the integrity of the
equipment
4. 'On-stream' methods such as corrosion monitoring or measurements of process
stream composition have indicated that there has been any significant change which
may have affected the rate of deterioration.

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Tischuk Enterprises (UK) Ltd.

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ECONOMICS OF RISK BASED INSPECTION SYSTEMS IN OFFSHORE OIL AND GAS
PRODUCTION.

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.
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.
x A reduction in inspection man-hours of 26% giving a cost saving of 48,000 per annum.
x A reduction in associated inspection services and mechanical man-hours of 31% giving a
cost saving of 145,000 per annum.
x 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.
x 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.
x A targeting of appropriate inspection techniques to most vulnerable plant identified by the
OCA analysis.

tp1_economics.DOC
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ECONOMICS OF RISK BASED INSPECTION SYSTEMS IN OFFSHORE OIL AND GAS
PRODUCTION.

x Application of alternative inspection techniques.


x 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).
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.
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
re-injected 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.

tp1_economics.DOC
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ECONOMICS OF RISK BASED INSPECTION SYSTEMS IN OFFSHORE OIL AND GAS
PRODUCTION.

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:
x a reduction of 70% in the level of Ultrasonic Testing.
x an increase in the intervals of internal vessel Inspections, by an average of 20 months.
x 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.
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 de-sulphuriser 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:
x a 27% reduction in shutdown duration has been achieved, by reducing the number of
vessels requiring intrusive inspection.
x Equating to a net revenue gain of 2 million for each shutdown,
x A reduction in shutdown costs of 1 million.
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.

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ECONOMICS OF RISK BASED INSPECTION SYSTEMS IN OFFSHORE OIL AND GAS
PRODUCTION.

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.
x 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.
x 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.
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.
x 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.
x 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.
x 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.
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 non-intrusive 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.

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ECONOMICS OF RISK BASED INSPECTION SYSTEMS IN OFFSHORE OIL AND GAS
PRODUCTION.
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
non-intrusive 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 Authoritative Review 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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ECONOMICS OF RISK BASED INSPECTION SYSTEMS IN OFFSHORE OIL AND GAS
PRODUCTION.

BENEFITS
By introducing Risk Based Inspection, the following benefits are being experienced
throughout the Oil and Gas and Petrochemical Industries:
x 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.
x 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.
x The change to non-intrusive, on-line methods of inspection instead of the traditional offline 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.
x 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.
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.

approved by: http://www.applyoilandgasjob.com

http://www.oilcv.com
http://www.bms-project.com

tp1_economics.DOC
Prepared by Susan Cushnaghan.

22 Dec 97

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