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Asset Management Plans for Gas Infrastructure

Conference Paper · January 1999

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 Asset Management Plans for gas infrastructure

Colin Bickell MIEAust, CPEng, MIGasE, and Ralph Godau MIEAust, CPEng, SESA

New legislation for Victorian gas companies requires demonstration of capability to

management safety to a ‘reasonable’ level of risk, but allows flexibility in doing this. New
economic regulation requires demonstration of proper asset management capability. Past
asset management practices are inadequate for demonstrating such capability, and do not
provide assurance of meeting longer-term needs. There is opportunity and need for
‘systems’ issues to be addressed, and to develop integrated and holistic decision processes
providing ongoing balance between safety, performance and costs. In Victoria a partnership
of stakeholders is developing improved practices in the form of Asset Management Plans.

1 INTRODUCTION & BACKGROUND

1.1 Aims
This paper argues that traditional asset management practices of the Victorian gas
distribution companies are not adequate for future needs or to take advantage of
opportunities of new legislation. The paper explains the need of safety and economic
regulators for natural gas distribution companies to have better Asset Management Plans
(AMPs). It also describes the expectations of the regulators for such plans and the progress
being made. The paper proposes that comprehensive and advanced AMPs are essential to a
gas company for more than regulatory compliance purposes.

1.2 Defining asset management, and AMPs

Asset management is practiced by many industries and in many forms. The following
definitions support the meaning used in this paper;

“managing a large scale asset to achieve organizational business requirements of safety,

environmental protection and service delivery at minimum cost of ownership” 1

“the process of guiding the acquisition use and disposal of assets to make the most of their
service delivery potential and manage the related risks and costs over their entire life” 2

Note: The term asset often focuses on physical attributes and their influence on a level of
service. The alternative term infrastructure better describes systems associated with a very
large asset, but is not normally used in the gas distribution industry.

The aim of AMPs has been defined 3 as encompassing all of the following;

¾ providing plans and controls for the technical efforts for the asset management of the
infrastructure system;

cmbD2000rev3.2 1 30 June 1999

¾ providing plans and controls for the operational efforts for the asset management of the
infrastructure system;
¾ reflecting an integrated approach by balancing all the factors associated with meeting the
infrastructure life cycle requirements. That integration addresses such areas as the
business plan, safety management plan, environmental management plan, emergency
management plan, human factors development plan, organization plan, asset performance
monitoring plan, logistics support and regulatory compliance plan.
1.3 The nature of gas distribution networks
A gas distribution network is an asset that is physically very large and geographically widely
dispersed. It is expensive to construct relative to the annual returns, and introduces high
level hazards into the general community. It is a form of ‘critical infrastructure’ due to the
dependency of the community on the network for economic, standards of living and safety
benefits.

To be viable, and to meet the varied requirements of the many stakeholders, the network
must achieve all of the following features.
¾ Be well specified, designed and constructed for performance and integrity.
Inadequately specified ‘system’ requirements, particularly with regard to the actual life
cycle, will give sub-optimal performance over the asset life. Poor design and construction
will also give sub-optimal performance.
¾ Have a long life with minimum future expense and disruption.
¾ Have low costs of operation and maintenance for the necessary level of reliability.
Reliability includes safety for the public and level of service performance. Escapes are
unsafe and require rapid and expensive repair. Supply interruptions create hazards and
poor service, and reduce competitiveness.
Optimizing these features requires considerable understanding of the stakeholder’s needs and
the behavior of infrastructure over its life. Asset managers need knowledge and processes to
ensure an acceptable and ongoing balance between costs, performance, and safety into the
distant future.

Demands for extended and increased performance, and the need for continual maintenance
and renewal, result in a long established gas distribution network experiencing all the life-
cycle phases at any one time and over a very long period.

Such assets are natural monopolies, and the ongoing balance of costs, performance and
safety must respond to the changing needs of the community and other stakeholders over a
very long period.

1.4 Managing a better balance

Responsibility for achieving the ongoing balance falls to various parties, particularly the gas
company, and the economic and safety regulators. Demonstrating an ongoing balance is the
practice of advanced asset management. It may in time be recognized as ‘infrastructure
management’.

The change to a better balance must be managed. Bolt 4 stated that in networks of long lived
assets, changing asset management practices (e.g. increasing or reducing renewals) will
generally have a delayed impact on service outputs. The decline in service may be gradual
hence masked by seasonal fluctuations and this lag effect may blunt incentives to plan and

cmbD2000rev3.2 2 30 June 1999

invest for medium to long term. Bolt argues that there is a case for direct incentives for good
asset management to ensure service quality, but warns that regulators should not seek to run
business.

The move towards advanced asset management in the utility industry requires a cultural shift
in infrastructure engineering, according to Kelly 5. He describes it as a move away from
simply building and replacing assets towards accepting the full responsibility for effective
and efficient asset ownership.

However, such a change is assisted, according to Snodgrass, et al 6, with hardware,

operating systems, and networking technologies providing infrastructure managers with
capabilities far beyond traditional means.

A ‘systems’ approach is advocated by Young and Azavedo 7 who state:

Systems Approach to asset management is an inter-disciplinary approach to provide an

integrated solution. It focuses on optimizing the whole system (global approach) instead of
improving only individual components.

¾ It aims to preserve the system function in the most economical way and hence does not
put unusual importance on any asset by itself.
¾ It covers the entire system life cycle from concept through design, construction,
operation, maintenance and final disposal. It thus concentrates on the process starting
with customer requirements and ending with customer feedback.
¾ It provides a solution by addressing the principal system parameters - 5M - Man,
Material, Machine, Money and Method, within technological possibility and economical
feasibility.
¾ It combines quality management and asset management to give a top down as well as
bottom up approach, endeavoring to, 'getting it right first time every time', aiming at
'Zero Defects' and continuous improvement through total participation.
¾ It strives for commercial competitiveness of the organization by providing an acceptable
solution to the customers, regulators, and stakeholders.
AMPs for public utilities are not new. Parsons 8 wrote:

In 1989, UK water companies were privatized but remained under government control
through regulation. There are two principal UK regulators for water distribution: the
economic regulator, the Office of Water Services (OFWAT), and the water quality regulator,
the Drinking Water Inspectorate (DWI).

OFWAT sets the prices to customers and requires companies to submit strategic, long-term,
business plans for all their assets - asset management plans (AMP) - to enable the
determination of the price cap. The first 'determination' set the price formula for five years.
Thereafter, OFWAT may carry out a periodic review of business plans, normally every five
years. The first review happened in 1994 (AMP2). Preparation for the 1999 review (AMP3)
is at an advanced stage.

1.5 Status of asset management practices of Victorian gas companies

Victorian gas companies have always used particular management practices for particular
assets. These practices were generally ‘function’ based and aligned with department

cmbD2000rev3.2 3 30 June 1999

boundaries within the companies. For example, the engineering group would not deal with
asset condition information, and the operational group would not deal with design standards.
Examples of particular practices are given later in this paper.

The practices have served the purpose of adequately balancing network safety and service
performance, resource requirements, and economic requirements in an environment where
growth was the main drive and accountabilities were internalized.

But current practices do not adequately address the ‘systems’ issues arising from an aging
infrastructure, increasing interdependencies arising between system elements, and from the
growing fragmentation and shortfall of technical knowledge, commercial demands and
community expectations. There is insufficient integration and use of information systems,
and lack of decision processes appropriate to the complex issues and relationships.

Current practices cannot answer the question ‘how are the competing demands of safety,
performance, and costs balanced?’ A suitable answer is essential to demonstrate that safety
will be managed to a level as low as reasonably practicable.

Industry restructuring and the reallocation of responsibilities challenge the capability of the
previous practices. There are new pressures from the aging networks and from all of the
stakeholders, including the regulators, customers and the businesses. A more advanced level
of asset management is needed, with more sophistication, to satisfy stakeholder and
maximize opportunities.

The deficiencies of current practices are only partly being acknowledged. What has not yet
been achieved is the integration and use of suitable business information systems, and
development of management decision processes, appropriate to the complex issues and
relationships that are necessary for effective AMPs. A ‘systems’ view is essential, to
develop suitable information systems and decision making processes.

2 SAFETY CASES
The Gas Safety Act 1997 introduces a safety regime for gas distribution companies called
Safety Case. This regime transfers significant responsibilities to the Gas Company, and it’s
operating risks.

The Safety Cases have adopted current asset management practices. But these practices do
not addressed longer-term ‘systems’ issues. On the basis that inappropriate management
decisions precede major catastrophes by years or even decades, a more ‘predictive’ and
holistic safety view is required than provided in current Safety Cases. Under arrangements
with the Office of the Regulator General, formalized in a Memorandum of Understanding,
the Safety Cases are also relied on to specify and monitor certain Reference Services outside
the Access Arrangements. This involves capital expenditure, operating and maintenance
costs, profit, retained earnings, and long term planning for integrity and security, and other
issues broader than gas safety.

2.1 Safety Case framework

Victorian gas distribution companies have operated under approved Safety Cases regime
since mid 1998. The gas companies gain responsibilities, but also flexibility in managing
risks through demonstrated performance rather than by compliance with prescribed
standards. The Safety Case is the company’s description and demonstration of how hazards

cmbD2000rev3.2 4 30 June 1999

and risks arising from distributing gas will be managed to an acceptable level (as low as
reasonably practicable), to suit it’s particular operations. There are three elements to the
Safety Case, being the Facility Description (FD), the Formal Safety Assessment (FSA), and
the description of the Safety Management System (SMS).

Compliance is by demonstrating performance in accordance with the SMS, including regular

reporting of agreed Key Performance Indicators. Verification is by OGS audits.

The FDs cover the current businesses. The FSAs are the foundation for current SMSs.
The FSAs have focused on the design, construction, operation and maintenance of the assets,
and risk prevention, protection and mitigation strategies in the near to medium term. This
has not yet addressed risks arising from complex or long term influences, or on business
changes. The caveat is that when risk levels change significantly, or when businesses
changes are likely to impact on safety management, or after 5 years, the Safety Case is
revised and resubmitted. The first generation of Safety Cases is more reactive than
proactive, focused on obvious rather than hidden consequences, and operational rather than
strategic.

The SMS will not be effective in the longer term unless containing an AMP, and unless
integrated with other business plans.

3 REGULATORS NEEDS FROM AMP

3.1 Past disasters
Infrastructure has always suffered failures. Over recent decades there have been rail
disasters, ferry disasters, bridge collapses, oil platform disasters, electricity generation and
supply failures, and gas production failures. Analysis of such events in this beyond this
paper, but it is concluded that changing conditions, demands, or practices during the life
cycle of the particular asset upset the necessary balance between costs, performance and
safety. Many individuals and communities have been victims of these failures. Owners,
operators and regulators are obligated to ensure these failures do not occur.

Historical events do provide valuable lessons for the day to day management of
infrastructure. However, infrastructure is aging, interdependencies are growing and society
is demanding better assurance that present and future generations will not suffer from past,
present or future mistakes. Infrastructure owner and operators must adopt management
practices that have a future and holistic perspective.

Gas distribution systems in particular are liable to failures with serious consequences (e.g.
the Kogarah gas explosion and fatalities, NSW, 1995). Regulators must obtain high levels of
assurance that the ongoing balance of cost, performance and safety is properly managed.
Demonstration of advanced asset management capability will provide such assurance.

3.2 Gas company safety standards

Gas distribution companies derived from the State monopoly were required to ‘maintain at
least the safety standards of Gas and Fuel’. These standards were embodied in technical and
operational documentation as well as custom and practice. The overall degree of compliance
previously achieved against the documented standards is problematic, although senior
managers were required to self certify compliance. In general only the technical and
prescriptive standards were applied, and more recent ‘policy’ standards were never

cmbD2000rev3.2 5 30 June 1999

implemented. Custom and practice ruled and sufficed. A draft policy for an AMP9 was not
adopted, as it presented insurmountable organizational and cultural challenges at a time of
major structural change.

The new safety standard is that hazards and risks be reduced to a level ‘as low as reasonably
practicable’ including hazards and risks from interrupting and resuming supply.

3.3 Gas company asset management practices

Examples of the various asset management practices by the State monopoly, which are
continued by its successor companies, include the following.
¾ Technical standards for materials, components, design, construction, and testing.
¾ Protection by barriers, markers, location information.
¾ Network modeling, forecasting and planning.
¾ Minimum competency levels for construction, operation and maintenance.
¾ Performance monitoring for leakage, corrosion, capacity reserve, and reinforcement
programs.
¾ Condition classification, according to materials, age, failure performance, location, and
other criteria.
¾ Economic evaluations of life extension by cathodic protection.
¾ Repair or replace strategies.
¾ Defects and incident reporting and analysis.
Practices and plans were generally limited to network operation and maintenance. A major
study (in 1996) of network condition, performance and life recommended a long term and
integrated strategy to upgrade low-pressure systems. This study also addressed economic,
organizational and future market issues. Although not formally adopted, the
recommendations focused capital works on more coherent upgrade programs. From then it
was commonly acknowledged that asset upgrade and replacement programs would rapidly
cut expensive repairs and reduce operating costs, with implications for R&D, marketing,
customer service and other areas.

The new gas distribution companies are developing tools to enable more effective asset
decisions, such as geographically based information systems. But sophisticated asset
management plans have not yet evolved, and the question of how to deliver an ongoing
balance between safety, performance and cost has not yet been answered. An effective
relationship between regulators, gas companies, consultants and academics might assist.

3.4 Gas company performance obligations, economic constraints and incentives

The Victorian Gas Access Code requires each distributor to submit an Access Agreement,
containing a Reference Tariff and Reference Services for the agreement period. The tariff
incorporates efficiency costs, economic efficiency, incentives and safety. Performance and
efficiency rewards are available. Forecasted operating and maintenance costs are included
through the Reference Tariff, provided these are generated by a reasonable methodology and
are within the prevailing industry standards.

Profit retention and efficiency gain incentives come from CPI-X and other mechanisms, to
be balanced against minimizing of capital investment, operating and maintenance costs, and
to achieve efficiency improvements and acceptable service standards. As there is a price

cmbD2000rev3.2 6 30 June 1999

cap, and to give some certainty to users and prospective users, service standards and a
measurable level of reliability are required. ORG relies on regulatory mechanisms outside
the gas Access Arrangement (e.g. the Safety Case) to specify some service standards, and
expects these to include reliability targets, asset management obligations, performance
indicator monitoring and audits, in similar fashion to those specified for the electricity and
water industries.

4 REGULATORS EXPECTATIONS
4.1 Two regulators needing assurance of future deliverables
Because asset management decisions will have long term and complex consequences, and
evidence of those consequences may not appear until corrective action is either too late or
very expensive, the OGS and the ORG (in consultation with the gas distribution companies)
now expects Safety Cases to include AMPs. The initial plans describe current and fairly
basic systems, but the regulators expect more advanced plans to evolve over the next few
years.

OGS and ORG established a Memorandum of Understanding in 1998, and it was also agreed
that the Safety Cases (including asset management plans) would provide mutual assurance of
an appropriate and proper safety, asset performance and asset cost balance. Common key
performance indicators have been established for safety and asset performance of the
networks. However, these current indicators are ‘global’ and have insufficient sensitivity
and relevance for asset management decisions. Despite being ‘global’ they are not ‘holistic’.
Better indicators or other means of assurance are likely to be needed to demonstrate adequate
asset management capability.

4.2 Baseline performance

The contemporary forms of asset management practiced for many years by the gas
companies has not been severely tested for an effective balance of safety, performance and
costs. Accountability was focused on safety and performance at the time, with cost a
secondary issue. Examples were the highly trained workforce guaranteed by gas company
resourcing and control, and high manning levels ensuring quick responses, sometimes
without modern technology or communication systems.

Internal and external pressures to change and hence the rate of change were low. The
monolithic organization did not foster innovation or experimentation, and technological
change tended to be retarded. So the previous asset management practices within gas
companies were simpler and serving internal purposes. For example the rate of repair or
replacement was balanced for budgetary and workforce stability, rather than for longer term
strategic infrastructure needs.

The balance is now subject to greatly increased complexity and rate of change. The ratio of
new to old assets is changing more rapidly, and reactive solutions will become inadequate.
Regulators therefore expect AMPs to be more comprehensive and holistic, more connected
to the changing needs and environment, and more responsive and predictive for changing
circumstances.

cmbD2000rev3.2 7 30 June 1999

4.3 New decision processes
The safety regulator will expect the AMP to include decision processes that will establish
and maintain the systems managing gas hazards and risks to a level ‘as low as reasonable
practicable’. The processes are expected to take in adequate scenarios and projections. This
means a planning horizon sufficient to allow correction of an adverse trend before a
condition becomes a threat to safety.

The economic regulator will expect the AMPs to demonstrate that responsible decisions are
made to preserve the value, functional capacity and performance of the network (no ‘gold
plating’ or ‘asset stripping’) into the future. Therefore technical and financial decisions must
converge.

The regulators would regard these expectations as consistent with responsible business
objectives, and providing the highest possible level of certainty within the context of
community expectations and the unforeseeable.

In seeking demonstration of appropriate AMPs, the OGS and ORG were predictably pressed
to explain exactly what was required. It was apparent that the gas companies were unsure of
how to demonstrate asset management capability beyond listing the current practices. It was
agreed that one AMP should meet the needs of both regulators (and the gas company!). A
‘specification’ for plans was offered to the gas companies, and accepted (see Appendix A).
But gas companies found difficulty in interpreting this specification. OGS took advice on
the fundamentals of such plans, and offered a ‘model’ plan (see Appendix B) to stimulate
discussions and development of individual company plans.

4.4 Initial AMPs

Initial AMPs aimed to deliver all of the following (see draft specification, Appendix A).
¾ Be comprehensive (covering elements of the business significantly impacting on the asset
and its management). The depth of this coverage is expected to evolve.
¾ Be embraced by senior management.
¾ Define business objectives for safety standards, performance standards, and costs.
¾ Identify critical influences on safety, performance and costs (where the planning horizon
is appropriate to the response capability).
¾ Include the business processes for achieving an appropriate on-going balance between
safety, performance and costs.
¾ Provide for demonstration of achievements against plan (so that justification can be given
later for any significant departures from AMP).
¾ Become holistic and integrated as understanding and systems develop.
4.5 Subsequent expectations of AMPs
Since agreeing on the draft specification, further expectations have evolved as follows.
¾ Include measures for effectiveness (KPIs may offer some measures).
¾ Be sufficiently ‘granular’ to avoid averaged out of important indicators.
¾ Declare the planning horizon (forever is impossible).
¾ Understand behavior within the whole system, under various scenarios.

cmbD2000rev3.2 8 30 June 1999

¾ Meet community expectations (possibly involving a degree of transparency, and possibly
achieved through a review forum representing regulators, owner/operators, and
independent experts).
4.6 Progress to AMPs
In November 1998 OGS and ORG ran a workshop for gas companies, to explain the
objectives, address issues such as confidentiality, disclosure, contents, and level of detail. A
timetable was agreed. OGS provided draft Asset Management specification (see Appendix
A).

Gas companies have mapped current asset management practices, focusing on the gas mains
repair/replace decision process. To some extent the information sources and current rule sets
are being identified. Linkages are being implied, and rule sets are still to be challenged
before considering a new holistic model. To encourage further development, OGS offered a
model plan (see Appendix B). Each company made presentations on their plan, or on
processes within the plan. Development stalled while gas company representatives went
through organizational restructuring.

4.7 Issues still to be addressed

The following issues are still to be addressed.
¾ Appropriate planning horizons for planning functions.
¾ Indicators of effective asset management. KPIs are inherently lagging, and ‘process
capability’ indicators may offer better prospects.
¾ Level of detail in analysis, sufficient to pick up ‘hot spots’ against background and avoid
averaging out important trends.
¾ Rate of progress and stages in developing more sophisticated AMPs.
Progress will depend on evolving integrated information systems, acceptance of the potential
benefits by all stakeholders, and on knowledge and understanding of the relevant systems. A
first step to integration could be to identify and group immediately related current practices,
to define the potential impacts from decisions within the group, and to relate consequences
of decisions within each group on other groups.

Development would be assisted through a relationship on between regulators, gas

companies, consultants and academics. There are tools for assisting development, such as
Capability Maturity Models Integrity (CMMI) in the Systems Engineering and software
industry.

4.8 Assessing AMP adequacy in 1999

The regulators intend to assess AMPs in late 1999 by review and audit, for at least the
follows.
¾ Capability of AMPs to picks up on and correct for future safety and performance risks
arising from currently identified internal and external threats.
¾ Comparisons between AMPs, and benchmarking against comparable asset management
practices.
¾ Planning horizons for critical inputs and asset condition as declared by gas companies,
and to publicize the claimed and assessed horizons.

cmbD2000rev3.2 9 30 June 1999

¾ As AMPs roll forward, OGS and ORG intends to review planned targets and
achievements, and to seek explanation of any discrepancies.
5 BENEFITS FOR ALL PARTIES
Moving to AMPs that meet the expectations expressed in this paper will lead to much better
knowledge of the many influences on asset safety, performance and costs. It will also lead to
very good understanding of the complex relationships and interactions between all the
components of asset management. Understanding the whole system will allow optimal
decisions and provide each stakeholder with the best possible outcomes. That will enable
gas companies to take advantage of the flexibility of the safety legislation, and to
demonstrate to regulators that safety is managed to a level of risk as low as reasonably
practicable.

Better decisions will result in better safety, better service delivery, and lower costs. If this
reduces or avoids future disasters the savings will be huge.

An optimal balance in safety, performance and costs would be the most efficient for the
business, and the community. Sub-optimal decision processes must result in more costs,
either overspending where not necessary or under-spending and having to catch up.

6 CONCLUSIONS
Previous asset management practices, and the recent AMPs developed by gas companies, are
not adequate for the future needs of businesses or the community. Setting up suitable
systems, and formalizing the decision processes, is necessary for safety and economic
assurances as well as business efficiency.

Although the safety and economic regulators each have primary roles only in parts of the
asset management process, their participation in developing a comprehensive model is
essential. But the gas distribution companies must pick up the challenge to quickly develop
suitable AMPs for their own and the community’s purposes.

The gas distribution companies should strive for the best possible capability in managing
their asset, meaning advanced AMPs. And the priority should be high, especially when
integrating the gas companies into businesses. John Howard 10 (from Tasmania's Devonport
City Council) suggested that postponing attention to asset management to such time as when
you faced a coronial inquest is not recommended.

cmbD2000rev3.2 10 30 June 1999

References
1
Kennedy, J R. (1993). An Asset Management Philosophy. Paper
2
Department of Treasury, Victoria. (1994). Asset Management Principles. Publication.
3
Godau, Ralph I. (1995). A Systems Framework for the Re-Engineering of an Australian Standard
Covering Gas Distribution Systems. Minor Thesis in Master of Engineering (Systems Engineering),
RMIT University.
4
Bolt, R. (1998). Asset Management and Regulatory Issues in an Ever Changing Environment. Paper,
Asset Management in Utilities. Melbourne: Internal Management Resources.
5
Kelly, A. (1997). Asset Management for Customers Sake: The Next Paradigm Shift. In 4th International
Distribution Utility Conference: Distribution 2000. Sydney.
6
Snodgrass, R. Kienzle, W. Labriola, A. (1997). Taking Infrastructure Management Systems into the Next
Century. Public Works 127.
7
Young, D. and Azavedo, D. (1998). What is an Asset Management Plan? How to Construct one and When
to Revisit it. In Asset Management in Utilities. Melbourne: International Management Resources, 1998.
8
Parsons, D. (1999). Asset Management in Water Distribution - Part 1. Pipes and Pipelines International
incorporating the Journal of the Pipeline Industries Guild Vol. 44 No. 2, no. March-April (1999): 5-14.
9
Gas and Fuel, Victoria. (1997). Policy on Asset Management. Technical standard.
10
Howard., J. (1998). Forward thinking asset management. Local Government Focus, April 1998. Accessed
May 10 1999. HTML. Available from http://www.loc-gov-focus.aus.net/1998/april/forward.htm.

Further reading from Godau, R. I.

(a) (1998). The Changing Face of Infrastructure Management. SE98 Symposium Proceedings: Systems
Engineering Pragmatic Solutions to Today's Real World Problems, 223-231. Canberra: Systems
Engineering Society of Australia.

(b) (1999). Infrastructure Management Model: A Case for Examining Relationships. Proceedings of the
International Council on Systems Engineering Ninth Annual Symposium, INCOSE 99. Brighton,
England: International Council on Systems Engineering.

(c) (1999). Infrastructure Management Model: Exploring Technical and Social Landscape. Transactions
of Multi-disciplinary Engineering Australia Vol. GE 22, no. Special Issue on Public policy.

About the authors

The authors have proposed and promoted a more comprehensive model for AMPs for some years within the
Victorian gas distribution industry, with some success. Colin Bickell has an extensive background in technical
standard development, firstly with Standards Australia then with Gas & Fuel and Westar. He chairs the
Australian Gas Association Task Force for gas distribution codes. He is Manager, Customer Safety, with the
Office of Gas Safety. Ralph Godau has 18 years experience with a gas distribution company. He is
undertaking a PhD at RMIT in Infrastructure Management, and is part time Systems Engineering Senior
Lecturer, teaching ‘Introduction to Systems Approaches’ and ‘Systems Engineering Analysis’. He is a
committee member of both the Systems Engineering Society of Australia (SESA) and the Society of
Engineering Management, Australia (SEMA).

cmbD2000rev3.2 11 30 June 1999

Appendix A – Draft Asset Management Plan Specification (as discussed by OGS, ORG and 3 gas distribution companies in Nov 1998)
To ensure proper management of the asset for which each distribution business is responsible, the following are requirements under the Safety case of the gas company.

Requirements Explanation Verification

Statement The business makes a statement on the way that the gas distribution asset (and all associated assets) will be managed into the foreseeable future The plan will be
(eg the technical life of asset sub-sets, such as each class of pipe). This statement describes how the business will make decisions with respect to submitted to OGS, subject
the asset, so that an appropriate balance will be maintained between the safety, service performance, and costs. to desktop review, and
subject to presentations,
The decision making process will take into account the changes anticipated (in the form of assumptions) over decision periods, including at least explanations and
the following business drivers; discussions.
• Government requirements (legislation, guidelines).
• Shareholders requirements.
• Customer requirements.
Elements of the plan will
• Community requirements.
be subject to periodic
• Environmental matters. external audit.
• Technology matters.
• Business needs.
• Asset needs for the projected period.
The appropriate balance will address the following;
1. Safety matters; progressive loss of integrity; reserve capacity and redundancy for demand growth, extremes in weather conditions and
system losses (including damage); gas composition with respect to effects on the asset; threats to the system from internal and external field
activities, environments, availability of necessary resources and support.
2. Service performance; consumer needs and expectations.
3. Costs; operational and capital costs, ??????
Purpose An explanation of the plan, in sufficient detail to show a clear understanding of the underlying principles, and to enable those implementing the As above
plan to understand what is required and how it will be achieved.
Inputs and A listing of key inputs (internal and external) and outputs (internal and external) sufficient to; As above
outputs
• Show the plan will effectively manage the asset;
• enable monitoring of effectiveness;
• enable timely modification of the plan as necessary to meet changing circumstances
Each key input and output shall have targets set for the following year.
Reports, Periodic report on effectiveness and adjustments (if any) to decision making processes, reporting of actual KPIs, and associated commentary on As above
Commentary over/under achievement of targets

cmbD2000rev3.2 12 30 June 1999

Appendix B – Asset Management Decision Model (as offered by OGS in March
1999)

XYZ GAS COMPANY

Model Asset Management Plan

Note: The content of this plan is completely hypothetical. It is intended to offer a conceptual model
so that asset based gas companies can develop an asset management plan suitable for their own
business. The (draft) asset management plan requirements as previously supplied to the gas companies
is the basis for compliance, not this model.

Appendices shown within boxes are intended to be at the end of the plan, or separate from the plan, but
have been inserted into the text at this stage to show the type of material being referenced. The content
of the appendices has not yet been given much consideration, and gas companies have systems and data
that should be suitable. The appendices indicate information to be common to the industry or specific
to the business. A meeting will be called on common information, eg asset management performance
criteria.

Comments on this document will be welcomed, and should be directed to Colin Bickell on 9341 3806
(email colin.bickell@ogs.vic.gov.au).

1 Introduction
This is the ‘XYZ Gas Enterprises’ Asset Management Plan, which is part of the Safety Case and the
Business Plan. It is to ensure that the gas distribution asset will meet defined performance criteria (see
Appendix A) for gas safety, gas delivery and total cost in the long term, that is for the entire life of each
particular asset class.
That plan is approved by and regularly monitored by senior management. The Board accepts it, and
the Board reviews any significant change or shortfall of the Plan.
Appendix A – Asset Management Performance Criteria (industry to develop suitable common criteria)
PC 1 Reliability of supply, as % availability over time, interval between supply loss, mean and
standard deviation of time off, and ???
PC 2 Safety of network (gas leaks), as number per customer per km, mean and standards deviation of
leak duration, leaks number per km per class of construction, and ???
PC 3 Gas risk exposure for critical locations, as number of leaks class x within ‘y’ meters of hospitals,
etc.
PC 3 Emergency response performance and capability, as mean and standards deviation of actual
times to make safe, ???

2 Asset Management Policy

The Asset Management Policy is that all decisions significantly impacting on management of the assets
(comprising all critical infrastructure, as listed in Appendix B) will be made within an asset
management plan. This plan addresses the asset in the context of a single whole system and as a
collection of subsystems, and is to ensure safety, cost and service delivery meet all stakeholders needs.
The principal objective of this policy is effective short and long-term management of the asset in the
best interests of the various stakeholders, and with regard to custody of economic infrastructure.
Appendix B – Critical Infrastructure List (Gas companies to develop appropriate lists, could be
common)
CI 1 Pressure control stations

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CI 2 Pipe and joints, by material/construction
CI 3 Public reporting of incidents systems
CI 4 Emergency response systems
CI 5 Network monitoring systems, leakage, CP, other
CI 6 Sole-supply mains to (large customer block, critical customer such as hospital, ???)
CI 6 ???

3 Asset Management Strategy

The Asset Management Strategy is that the network/asset and all critical elements will be;
• Designed and constructed to industry code, except special cases subject to specific management
plan and approval.
• Operated to industry best practice procedures, and key asset condition and performance indicators
monitored continuously. Resources used will be (suitable for current and projected needs) …
• Maintained in such condition to ensure trends in safety/performance/costs over 1, 2 and 5 year
projections show condition will not breach predetermined levels. Assets will be repaired or
replaced, and extended or contracted in accordance with other defined strategies and specific plans
consistent with a fully costed asset overall asset management program with 1, 2, 5, 10 and 30 year
projections. Those strategies and plans will provide opportunities for efficiencies as available, to
maximum of 1-year ahead/behind targets.

Also, XYZ Gas Enterprises will;

• Form close associations with other buried infrastructure utilities to maximise opportunities for
combined street work at reduced cost and disruption.
• Work in alliance with service and material suppliers, to fully develop technological benefits where
possible.
• Adopt and apply best available asset management tools, including information management and
processing tools (such as GIS), predictive modeling software, and RCM (where appropriate).

4 Asset Management Model

The Asset Management Model identifies key asset management information and activity ‘support
modules’ critical to the asset management, and the activity/information and performance at each
module is defined and monitored against a program. The important asset management relationships
between key modules are also identified (see Figure 1), monitored and assessed periodically.

The Asset Management Model also identifies the core decision process, dealing with information from
the modules and setting the program and plans. The key decision making process is largely within the
Senior Management Team, buy some specific and all routine decisions are made by Group or
Department Managers (see Appendix C for examples).

Appendix C – Key Decision Areas (typical) (Gas company will have own list)
KDA 1 Changes significantly impacting on safety, performance or costs for any critical infrastructure
asset class (eg stronger but thinner pipe) SMT
KDA 2 Change of procedure for construction DM. ……. KDA 3 ???

4.1 Key asset management support modules

4.1.1 Network/Assets Information
Network and asset information is managed by the Business Information Group and comprises data on
the network asset, including design specifications, condition on commissioning, age, change of
condition due to aging, design capacity, intended and current configuration, modifications, location,
classification of location, relevant relationships with other assets.

The information is captured during design, testing, commissioning, operation, modification and
decommissioning of each asset element, and verified by …(states how verified)….. Review and
updating of age related information is done by schedule (see Appendix D).

The information is held in various data bases (see Appendix A), and is accessed through a ‘Perfect
Information System’ (PIC) to all other nodes.

Appendix D – Network and Asset Information Data Sources, and review schedules (own lists)

cmbD2000rev3.2 14 30 June 1999

NAID 1 Design drawings and specifications on modification;
NAID 2 As laid plans replaced on modification;
NAID 3 Asset elements data, including all characteristics relevant to performance, condition,
remaining life and reliability, etc. ……. NAID 4 ???

The information is grouped in classifications as needed for Systems Analysis Group, Operational
Performance Group, and Asset Management Group. These classifications are given in Appendix E).

Appendix E – Asset Classifications of Network/Asset Information (common lists desirable, for common
indicators)
AC 1 Pressure control stations, giving ……….
AC 2 Pipe (steel, unprotected), giving ……….
AC 3 Pipe (steel, protected), giving ……….
AC 4 Communication systems for operational purposes, …….
AC 5 Communication systems for emergency response purposes …….AC 6 ???

4.1.2 Operational Performance Information

Operational performance information comprises all relevant information about the receiving,
controlling pressures/flows, and supplying gas through the network, and about all activities associated
with the repair, renewal, modification and decommissioning of the network/asset. It includes
information obtained from monitoring the operational performance against the Asset Management
Program and SubPlans.

The information is derived in association with Network/Asset Information, Systems Analysis

Information, and Asset Management Program and SubPlans.

4.1.3 Asset Management Program and SubPlans

The Asset Management Program (AMPr) is managed by the Senior Management Team and is a
comprehensive and fully costed program for managing the critical assets and matching the
Stakeholders Needs with Operational Performance for 1, 2, 5, 10 and 30-year projections. The
program describes the interdependencies between sub-plans, and the consequences of failure or
shortfall in each sub-plan on the program. The program takes into account Stakeholders Needs
Information, Network/Asset Information, Systems Analysis Information, Operational Performance
Information, and relevant information about other infrastructure organizations (see Appendix F).

The AMPr is reviewed annually as part of the Business Plan Review, and signed off by the Board. It is
also reviewed immediately if justified by exceptional circumstances such that the plan may be invalid.

Appendix F – Asset Management Program, (1, 2, 5, 10 and 30-years) (own lists)

Overall program showing projected needs, gaps and responses, effects/impacts on safety, performance
and costs. Also showing consequences/relationships contributing to overall performance of network
and significant systems.

The Asset Management SubPlans (AMSPlx) are developed and managed by Department Managers and
specific fully costed plans for elements of the asset management program, specifying work, resources,
responsibilities, schedules, deliverables, costs and expected outcomes. AMSPlx are listed in
Appendix G, and are reviewed at nominated intervals.

Appendic G – Asset Management SubPlans List and review schedule (own lists and schedules)
AMSPl 1 Leakage management (subplans include Design standards plan, Construction standards
plan, Protection plan, Monitoring plan).
AMSPl 2 Outage management (subplans include Supply review plan, Operational Capability plan,
Incident Reporting and Response plan). ….. AMSPl 3 ???

4.1.4 Systems Analysis Information

The Systems Analysis Information is derived by the Systems Analysis Group from life cycle and shorter
term analysis of Stakeholders Needs Information, Network/Asset Information, Operational
Performance Information, Asset Management Programs and Plans, and knowledge of
interrelationships within the network and the business systems.

cmbD2000rev3.2 15 30 June 1999

The analysis incorporates all of the following (with specific analysis projects listed in Appendix H;
• understanding of the behavior of the network/asset under credible scenarios over the life cycle, for
planning purposes;
• identification and evaluation of risks related to the safety, performance and cost of operating and
maintaining the asset;
• speculation, assessment, projection, modeling, and reviewing, of asset management programs and
plans, for determination of appropriate and effective plans and program;
• evaluation of operational performance information and operational contributions to each plan and
the program, for revision or plans and program;
• determining appropriateness of Asset Management Program and SubPlans.
• evaluation of impacts of changing stakeholders needs, and plans to meet needs.

Appendix H – Systems Analysis Information Projects list (own lists)

SAPr 1 Asset Performance Projections, 1, 2, 5, 10, 30-years
SAPr 2 Asset Operating Costs Projections, 1, 2, 5, 10, 30-years
SAPr 3 Asset Safety Performance Projections, 1, 2, 5, 10, 30-years
SAPr 4 Risk analysis for safety, performance, costs (medium and long range) ….. SAPr 5 ???

4.1.5 Stakeholders Needs Information

The Stakeholders Needs Information is managed by the Business Compliance Group and captures all
relevant needs, current and projected, for the following stakeholders (see Appendix I for list of needs);
• Gas Company shareholders (covering financial matters such as shareholding value, dividends,
exposure, etc);
• Government (covering legislative requirements, policies and strategies, taxes and charges, etc);
• Customers (covering services, obligations, rights and expectations, safety, supply reliability, etc);
• Community (covering environmental and related responsibilities and expectations, emergency
response, field operational and planning matters, etc);
• Contractors and Suppliers (covering quality and reliability, developments, technology, etc);
• Business (covering viability, continuity, development, employees, etc);
• Existing Asset (covering current capability, backlogs, needs and programs, etc).

Appendix I – Stakeholders Needs list (own lists, but would expect to be similar)
SHN 1 Shareholders require return on investment of X, projected 1, 2, 5, 10, 30-years.
SHN 2 Legislation ……, and projected legislation…. SHN 3 Business ……., ……

4.2 Asset Management Decision Process

The Asset Management Decision Process comprises consideration of all significant asset, system and
subsystem issues. This consideration is by the Senior Management Team, or Group or Department
Manager if applicable. The consideration takes account of all relevant information available from the
Key Asset Information Modules, and leads to setting an appropriate balance between safety,
performance and cost implications. Each decision is formalised into a revised or new Asset
Management Program and/or Asset Management SubPlan.

4.3 Asset Management Records

Records are maintained of all data, information, decisions, plans and programs (see Appendix J for
typical list).

Appendix J – Asset Management Records, (typical list) (own lists)

AMR 1 Risk analysis as at 1/1/2000, all risks, with 1, 2, 5, 10, 30-year projections
AMR 2 Asset condition analysis as at 1/1/2000, all classes
AMR 3 Asset Management Program for 99/00, with list of SubPlans…. AMR 4 ???

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 XYZ GAS ENTERPRISES - Asset Management Decisions Model

Satisfying stakeholder’s needs

Future expectations of each

Business, Regulatory and Legislative,

Community, others

Stakeholders Information
Interfaces with Business
other Regulatory
infrastructure Legislative Appropriate
organizations
classifications
of asset to
Matching
support SAI,
needs
OPI, AMP

ASSET
DECISIONS Network/Asset
Asset Management Information
Programs and Plans
Safety

Understanding
Cost Performance behavior of asset
Determining
appropriate wrt systems and
program interaction

Operational Systems
Performance Analysis
Information Information
Evaluating
contribution of each
subplan to program Using life-cycle-
Identifying analysis (cost based)
Monitoring critical
against AMP Identifying risks
infrastructure Addressing short and
long term needs

cmbD2000rev3.2 17 30 June 1999

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