International Journal of Management and Strategy (IJMS) 2011, Vol. No.

II, Issue II, January-June 2011

http://www.myresearchpie.com/ ISSN: 2231-0703

IOC FIRE: WHERE THE BUCK STOPS? Dr. Neeti Rana, Associate Professor, Human Resource Management, School of Management, Gautam Buddha University, Greater Noida,India Dr. Neehar Singhal, Assistant Professor, Business Comm., School of Humanities and Social Sciences, Gautam Buddha Univ, Gr. Noida,India

Disasters are seen as the consequences of inappropriately managed risks. The present case study deals with the oil fire that took place in the Indian Oil Corporations (IOC) depot in Jaipur, October 2009. It sheds light on crisis and disaster management; how oil companies are vulnerable to crises. It brings forth the dangerous ripple effects it can have on the business and society at large. The case can be discussed with reference to emergency management, steps in the process of disaster preparedness, industrial safety management, human errors, plant management and business operations. Keywords: Risk Assessment, Management, Legal and Regulatory Issues

This case is prepared solely to provide material for class discussion. The authors do not illustrate either effective or ineffective handling of a managerial situation. The information is compiled from published sources. Singhal, N. & Rana, N., Gautam Buddha University

International Journal of Management and Strategy

ISSN: 2231-0703

International Journal of Management and Strategy (IJMS) 2011, Vol. No.II, Issue II, January-June 2011

http://www.myresearchpie.com/ ISSN: 2231-0703

INTRODUCTION The Indian Oil was celebrating its 50th anniversary year but it became a blazing funeral with the devastating weeklong inferno at its oil depot 20 kilometres away from Jaipur, the famed "Pink City" in north western India. An estimated 12 people died and more than 150 were injured in the oil fire that blazed from the night of October 29, 2009. The fire was a major disaster in terms of deaths, injury, loss of business, property, man-days, displacement of people and environmental impact. The people who were in the vicinity of Indian Oils Sitapura Oil Terminal felt presence of petrol vapour in the atmosphere around 4:00 p.m. on the ill fated day. Within next few hours the concentration of petrol vapour had intensified making it difficult to breathe. The Met department recorded a tremor measuring 2.3 on the Richter scale around the time the first explosion at 7.36 pm which resulted in shattering of glass window nearly 3 km from the accident site. The police, civil administration and fire emergency services were unable to handle the situation developing in the Oil Terminal.

GLOBAL ENERGY DEMAND The 2009 World Energy Outlook, published by the International Energy Agency, predicts that world demand for oil (often used as a proxy for world demand for energy) is projected to increase by 60% i.e. from 2,000 million tons of oil equivalent (mtoe) to 16,800 mtoe in 2030, as developing countries industrialise and rich countries continue to guzzle power. About 93% of this increase in demand is expected to come from China and India. Fossil fuels will continue to dominate, estimated to account 85% of new demand. Meeting this demand growth, will require spending $26.3 trillion by 2030, as the majority of oil production in 2030 will come from fields that have not yet been discovered or developed. (Exhibit 1)

If we talk about India, the sales/consumption of petroleum products during 2008-09 were 133.40 MT (including sales through private imports), an increase of 3.45 per cent over sales of 128.94 MT during 2007-08, according to the Ministry of Petroleum. India's domestic demand for oil and gas is on the rise. As per the Ministry of Petroleum, demand for oil and gas is likely to increase from 186.54 mtoe in 2009-10 to 233.58 mtoe in 2011-12. The refining capacity in the country increased to 177.97 million tonnes per annum (MTPA) as on April 1, 2009 as compared to 148.968 MTPA as on April 1, 2008.

International Journal of Management and Strategy

ISSN: 2231-0703

International Journal of Management and Strategy (IJMS) 2011, Vol. No.II, Issue II, January-June 2011 PROFILE OF INDIAN OIL CORPORATION

http://www.myresearchpie.com/ ISSN: 2231-0703

Indian Oil is the largest commercial enterprise of India and maintains its dominance in the market place and clock the highest ever sales of over 66 million tons of petroleum products, registering a growth of 5.67% over the previous year. Indian Oil takes a very bullish stand on petrochemical business. A well laid-out road map of vertical integration-

upstream into oil exploration and production (E&P) and downstream into petrochemicals- and diversification into natural gas marketing in addition to globalisation of its downstream operations is the key to its sustained success. It ranked 105th on the Fortune Global 500 List in 2009. Indian Oil and its subsidiaries account for a 47% share in the petroleum products market, 40% share in refining capacity and 67% downstream sector pipelines capacity in India. The Indian Oil Group of Companies owns and operates 10 of Indias 19 refineries with a combined refining capacity of 60.2 million metric tonnes per year. The turnover (inclusive of excise duty) of Indian Oil for the year ended 31 st March 2009 was Rs. 2,85,337 crore. The external revenue was Rs.3, 05,448 crore and operating profit was Rs.6950 crore. Being Indias largest public sector petroleum refiner, Indian Oil has ranked No.1 in the FE 500, 2009-10, rankings on the basis of net sales. (The FE 500 is an annual prestigious ranking published by premier business daily the Financial Express.) It is placed in the 2nd position on the basis of assets and 5th position for its net worth.

THE ONSET OF THE OIL FIRE

The stage was set for the impending disaster in the evening shift of Oct 29, when a crew of four personnel of Indian Oil were doing a routine procedure. They were transferring kerosene and motor spirit through a pipeline to the neighbouring installation of Bharat Petroleum Corp Limited. At about 5.30 p.m., there were only three people on duty, as one of the employees had gone out for some personal work. Only one employee was operating the valve of tank 401A, known as Hammer blind valve, a device which is used to isolate a pipeline. It was found that liquid motor spirit had gushed out from the open area on the top of the valve, as another valve connecting to the tank was also open at the same time.

International Journal of Management and Strategy

ISSN: 2231-0703

International Journal of Management and Strategy (IJMS) 2011, Vol. No.II, Issue II, January-June 2011

http://www.myresearchpie.com/ ISSN: 2231-0703

One after another, the three personnel went to the spot and fell unconscious due to the overpowering fumes. Non-availability of a self-contained breathing apparatus and fire suit immediately left the entire response team as mere helpless spectators in preventing the incident. Since none of the shift staff was available and the senior management could not reach the site, the leak continued for 75 minutes.

Around half past six the staff in the terminal having failed to contain the leak and flow of petrol panicked and reported the matter to the nearby Sanganer Sadar Police Station. Within next half an hour the local police chief and the District Collector were on the spot along with Indian Oil General Manager, but with no plan to deal with the situation. The nearby industries, which were running second shifts, were cautioned to vacate the area. At 7:35 p.m. a huge ball of fire with loud explosion broke out engulfing the leaking petrol tank and other nearby petrol tanks with continuous fire with flames rising 3035 meters and visible from 30 km radius. It was estimated that the nearly 1000 tonnes of motor spirit had leaked out, which led to an explosion equivalent to 20 tonnes of TNT. Window panes of buildings over two km away shattered due to the massive blast. (Exhibit 2) The traffic on adjacent National Highway no.12 was stopped leading to 20 kilometres long traffic jam. The Jaipur (Sanganer) Airport is just 5 Kilometres away from the accident site.

Both the Army and experts from Mumbai were employed on the 30th of October to contain the fire. The district administration disconnected electricity and evacuated nearby areas to limit the damage. Army and Fire Brigades continued to work relentlessly to douse the fires. The 70 feet tall flames spread in the area of 2-3 kilometres spreading the destruction with it. The representatives of Petroleum Ministry visited the site on the same day and concluded that the fire at Indian Oil Corporation's fuel depot on the outskirts of the city had to die down on its own and there was "no other solution" to douse the leaping flames. Asked if the fire would continue to rage, it was said - "Thats what experts say. There is nothing else one can do. There is no other solution or alternative". "We will have to let all the fuel burn. Only then will experts be able to go anywhere near the site."

International Journal of Management and Strategy

ISSN: 2231-0703

International Journal of Management and Strategy (IJMS) 2011, Vol. No.II, Issue II, January-June 2011

http://www.myresearchpie.com/ ISSN: 2231-0703

Incidences of other Fire Accidents On March 23, 2005, a fire and explosion occurred at BP's Texas City Refinery in Texas City, Texas, killing 15 workers and injuring more than 170 others. The Buncefield fire was an inferno caused by a series of explosions on 11 December 2005 at the Hertfordshire Oil Storage Terminal, England. The terminal was the fifth largest oil-products storage depot in the United Kingdom, with a capacity of about 60,000,000 imperial gallons (272,765,400 l) of fuel. Production at the 67,000 barrel per day Alon USA Energy Inc refinery in Big Spring, Texas, was shut by a blast on February 18, 2008. An explosion and fire at a Washington state oil refinery shook homes and shot flames into the night sky on April 2, 2010, killing five people and critically injuring two others. The blaze occurred while maintenance work was being performed

Inquiry Committee Report Human error, lack of safety procedures, defunct devices, faulty safety audits and design flaws were behind the October 2009 fire., says the independent probe report released on 2 February 2010. The basic or root cause is an absence of site specific written operating procedures, absence of leak stopping devices from a remote location and insufficient understanding of hazards, risks and consequences, M.B. Lal, who chaired the independent inquiry committee, said. The seven-member committee submitted its report to then Petroleum and Natural Gas Minister.

The Oil Industries Safety Directorate found that the remote leak stopping device was not working at the Jaipur terminal in an audit in 2003. But the inquiry found that despite the recommendation of the 2003 audit, the remote leak stopping device was never operational in last six years.

International Journal of Management and Strategy

ISSN: 2231-0703

International Journal of Management and Strategy (IJMS) 2011, Vol. No.II, Issue II, January-June 2011

http://www.myresearchpie.com/ ISSN: 2231-0703

Even after the leak started, the accident could have been managed if safety measures provided in the control room were taken, said Lal, adding that the lack of shutdown from the control room, absence of senior officers and any emergency response for 75 minutes led to the uncontrolled explosion. Among the major recommendations was the strengthening of the safety function in Indian Oil Corporation by improving the quality of the cadre and making it directly report to the head. It also asked for strengthening the internal safety auditing functions by making it cross-functional and providing professional safety auditing training.

The Disaster Management THE DISASTER MANAGEMENT ACT, 2005 envisages that each revenue District must have a Disaster Management Plan. While 31 revenue Districts of Rajasthan had placed the Disaster Management Plan on Rajasthan Government website Jaipur District did not have any Disaster Management Plan. A Disaster Management Plan for Jaipur District has been put on Internet on 17 November 2009 i.e. 20 days after the accident took place on 29 October 2009.

The District Administration and Indian Oil Corporation had no disaster management plan to deal with this kind of calamity. The local fire officers were ill equipped to deal with fire accidents of this magnitude. The presence of two other oil facilities in close proximity to the IOC depot, and the fact that there were residential areas in the vicinity compelled them to rule out many options. To have not one but three oil storage facilities

run by three different companies in the same area proved to be a strategic disaster. The storage facility of Hindustan Petrochemicals Limited, HPCL, is just 800 metres from the IOC compound. Scores of factories also litter the Sitapura Industrial Area. All these factors forced the district administration and IOC to remain onlookers and no efforts were made to breach the terminal wall to get closer to kerosene and diesel tanks to cool them with water jets. The District Collector prohibited the entry of anybody within a five kilometre radius of the area under fire. The Jaipur-Kota highway was closed down for vehicles and about 20 trains scheduled to pass through the nearby railway line were affected. Residents of about ten nearby villages, which housed an estimated five lakh people, and inmates

International Journal of Management and Strategy

ISSN: 2231-0703

International Journal of Management and Strategy (IJMS) 2011, Vol. No.II, Issue II, January-June 2011

http://www.myresearchpie.com/ ISSN: 2231-0703

of hostels in 10 engineering and technical colleges and a medical college were evacuated in the wake of the incident after which power supply in the area was cut off. (Exhibit 3) Residents complained of lack of water and electricity. Officials insisted that they were supplying water to the residents through tankers as electricity supply had been cut. AFTERMATH OF THE TRAGEDY Health and Environment Hazard Compounding the woes of the people, a dark cloud of smoke covered a vast area. People experienced difficulty in breathing as well as itching in the eyes. Meanwhile, doctors said that the smoke, which was emitting many harmful gases, might create serious health hazards to the people of surrounding areas and advised them to cover their faces with mask of cloth. Acute problems will occur due to emission of gases like carbon monoxide that replaces oxygen, carbon-dioxide, and nitrous oxide. This would lead to health hazards like chest heaviness, breathing problems and uneasiness, warned Dr. Pradhumn Sharma.

Mainly people suffering from COPD (Chronic obstructive pulmonary disease), asthma, will experience impact on chest and such people should keep their windows and doors closed and remain indoors so that the polluted air doesnt enter their houses, Dr. Sharma added. The pregnant women were advised to stay far away from the polluted area. It is better if these women stay away from the polluted area as it can affect the child in the womb, a Doctor said. In the nearby villages of Sitarampuria and Sukhpuria, cases of fever and vomiting among children started being reported. We have deputed eight mobile health teams in areas near the fire site. We have also asked them to visit the areas where smoke has spread in the last couple of days, an official of the State Medical and Health Department said.

International Journal of Management and Strategy

ISSN: 2231-0703

International Journal of Management and Strategy (IJMS) 2011, Vol. No.II, Issue II, January-June 2011

http://www.myresearchpie.com/ ISSN: 2231-0703

The state pollution control board monitored the air pollution level. The department of environment constituted a panel to assess the impact of the fire. Financial Implications Beyond the immediate destruction - IOC lost US$300 million in destroyed infrastructure, equipment and 50,000 kiloliters of burnt oil, executive director, N Srikumar, told Asia Times Online. The fire damage reached far into the regional economy; 450 of the approximate 1,000 factories in the Sitapura industrial area either suffered extensive damage or were gutted. Estimated losses crossed $200 million. Victims including exporters had their businesses burnt out in a night. The IOC also said that it would take at least 15-18 months to rebuild the facility in Jaipur. Some of the industrialists who visited their units for the first time after the fire broke out were shocked to see the extent of damage.

In my unit, window glasses have been shattered. Furniture and fixtures are broken. Some machines are also damaged. It seems as if a tornado has hit the factory, cried Vijay Chordia, one of the owners of a jewellery export house. The State Government promptly announced a cash compensation of Rs. 2, 00,000.00 to the dead and in addition IOC paid Rs. 10,00,000 to the next of the kin of dead and varied amount of compensation between Rs.1, 00,000 and 2, 00,000 to the injured. The Sitapura Industrial Association rejected the relief package announced by the state government. According to the association, of the 1,100 units situated in the area, 500 have suffered losses ranging from Rs.500,000 to Rs.700,000 each. In some units, losses run into millions of rupees, said S.N. Kabra, the association president. We reject the compensation package offered by the state government. Offering rebates in the form of waiver of VAT collection, service tax and fire tax means nothing to us, he added.

International Journal of Management and Strategy

ISSN: 2231-0703

International Journal of Management and Strategy (IJMS) 2011, Vol. No.II, Issue II, January-June 2011

http://www.myresearchpie.com/ ISSN: 2231-0703

Shares of the Indian Oil Corp scrip fell over 7.5 percent on 30th October on the Bombay Stock Exchange. The shares of the state-run refinery major fell to Rs.291.50 in early trade, down from its previous close at Rs.315.25, but stabilised marginally at Rs.308.10 later Complaints and Litigations An executive of a private company filed a complaint against Indian Oil Corporation (IOC). With four of the 11 tanks in the depot still ablaze on the sixth day, the IOC was charged with criminal negligence. As per the orders passed on 4 December 2009 by the Chief Judicial Magistrate, Jaipur Mr. Mahaveer Swami, the Police Station Adarsh Nagar, Jaipur has registered FIR 337/09 under sections 166, 304A, 511, 120B against the 20 top management officials of IOC.

The Industries & Education Institutions in Sitapura Industrial Area have filed about 150 complaints with Sanganer Sadar police station about deaths, injury and loss of property due to negligence of Indian Oil Corporation Limited.

India's worst oil fire disaster has not only had the IOC golden jubilee birthday cake turn into a deadly fireball, but again roused worldwide safety questions about locating industrial and residential areas near large oil storage facilities and risk analysis and mitigation policies. It was decided to review the location of all Oil Terminals throughout India and shift these terminals beyond city limits within a period of next 1218 months. Discuss: 1. Crisis is a test of an organizations capabilities. 2. Audits of safety programmes can be used to assure regulatory compliance and a safe workplace. 3. Human Error has been cited as a cause or contributing factor in disasters and accidents in industries. 4. Legal issues involved in industrial accidents are very complex. 5. Energy conservation is an economic viable opportunity for energy productivity.

International Journal of Management and Strategy

ISSN: 2231-0703

International Journal of Management and Strategy (IJMS) 2011, Vol. No.II, Issue II, January-June 2011

http://www.myresearchpie.com/ ISSN: 2231-0703

REFERENCES http://www.iocl.com/print/aboutus/Distinctions21.htm http://www.iocl.com/AboutUs/Profile.aspx

http://www.reuters.com/article/idUSN1817354220080218 http://www.click2houston.com/news/4311459/detail.html http://www.guide-xt.com/5-die-in-wash-refinery-blast-and-fire/ http://en.wikipedia.org/wiki/Buncefield_fire http://ehsjournal.org/http:/ehsjournal.org/martyn-ramsden/buncefield-process-safety-report-fuel-storage-facilitiesuk/2010/ Final Report on Safety & Environmental Standards for Fuel Storage Sites, The United Kingdom Process Safety Leadership Groups (PSLG), 11 December 2009 http://www.worldlatestnews.com/environment/jaipur-air-poisoned-by-oil-depot-fire-pollution-board-90123 http://timesofindia.indiatimes.com/city/jaipur/12-dead-in-Jaipur-oil-depot-blaze-Deora-says-fire-to-die-down-on-itsown/articleshow/5178960.cms http://eerie-maverick.blogspot.com/2009/11/fir-against-company-indian-oil.html http://ibnlive.in.com/news/fire-at-indian-oil-depot-in-jaipur-still-on-5-dead/104257-3.html http://news.in.msn.com/national/article.aspx?cp-documentid=3328199&page=2 http://beta.thehindu.com/news/national/article40564.ece http://www.thaindian.com/newsportal/business/jaipur-fire-indian-oil-faces-negligence-charge_100269239.html http://timesofindia.indiatimes.com/city/jaipur/Human-error-blamed-for-IOC-inferno/articleshow/5529563.cms Parihar, Rohit (October 29, 2009). "12 dead, over 200 injured in Indian Oil depot fire in Jaipur". India Today. Retrieved 2009-11-05.

International Journal of Management and Strategy

ISSN: 2231-0703

International Journal of Management and Strategy (IJMS) 2011, Vol. No.II, Issue II, January-June 2011

http://www.myresearchpie.com/ ISSN: 2231-0703

http://en.wikipedia.org/wiki/2009_Jaipur_fire http://www.atimes.com/atimes/South_Asia/KK05Df01.html The World Energy Outlook, The International Energy Agency, 2009

EXHIBITS

Exhibit 1: The Age of Tough Oil

International Journal of Management and Strategy

ISSN: 2231-0703

International Journal of Management and Strategy (IJMS) 2011, Vol. No.II, Issue II, January-June 2011

http://www.myresearchpie.com/ ISSN: 2231-0703

Exhibit 2: All Eyes on IOC

Exhibit 3: Living Through the Nightmare

International Journal of Management and Strategy

ISSN: 2231-0703

International Journal of Management and Strategy (IJMS) 2011, Vol. No.II, Issue II, January-June 2011

http://www.myresearchpie.com/ ISSN: 2231-0703

Exhibit- 4

International Journal of Management and Strategy

ISSN: 2231-0703

International Journal of Management and Strategy (IJMS) 2011, Vol. No.II, Issue II, January-June 2011

http://www.myresearchpie.com/ ISSN: 2231-0703

Causal Analysis
Critical Factors 1. Uncontrolled loss of primary containment in the form of a jet of gasoline Immediate Cause Wrong operation of valves by operator Improper equipment (Hammer Blind Valve) Absence of second operator Lack of supervision Root Cause Ineffective Training Poor design awareness Indiscipline Poor leadership at supervisory level Ineffective internal safety audit No external safety audit in 6 years Lack of operational skills and poor mental alertness Lack of training in emergency management Non-availability/lack of awareness on PPE use Policy Issues Safety not given adequate priority Lack of enforcement of discipline Leadership development program Safety function not independent/ autonomous No ESA conducted in last 6 years

2.

Operating personnel incapacitated

3.

Loss of secondary containment

All operating crew overcome by leaking gasoline liquid and vapour Second operator attempting rescue also entered the affected area and was overcome No PPE (Personnel Protective Equipment) Open dyke valve in tank 401A dyke

Lack of risk awareness Lack of training program

4.

Inadequate mitigation measures

MOV closure from control room made defunct Non-availability of self contained breathing apparatus (SCBA) No emergency plan for the scenario No emergency responder Absence of command and control during emergency Selected device for positive isolation is potentially hazardous Operating area was inside dyke MOV operation was from inside

5.

Shortcomings in design and engineering

Poor operating discipline Lack of supervision Position not monitored in control room No Management of Change procedure Improper PPE Policy Quantitative Risk Assessment not done Absence of Training in Emergency Management Inadequate leadership Ineffective internal safety audit No external audit in 6 years Old practice not reviewed No hazard analysis Improper HAZOP No hazard analysis done

Leadership development not effective Independence of safety functions lacking Risk awareness Safety not given adequate priority Risk perception Risk awareness Emergency awareness Leadership development not effective Independence of safety functions lacking

Acceptance of status quo No formal structure to scan latest industry development/best practices etc. and picking up best industry practice

International Journal of Management and Strategy

ISSN: 2231-0703

International Journal of Management and Strategy (IJMS) 2011, Vol. No.II, Issue II, January-June 2011
dyke Operating area access/escape unsatisfactory MOV was used for tank isolation as Hammer Blind isolation. No fall back provision Poor operating discipline Lack of supervisory control -

http://www.myresearchpie.com/ ISSN: 2231-0703

Improper HAZOP

6.

Absence from site of one operator

Lack of supervision and monitoring through surprise checks Laxity in strict enforcement of conduct & discipline rules Incompetency at supervisory level Lack of understanding of hazard potential Absence of training in emergency management Lack of PPE

Inadequate monitoring by senior management Leadership development not effective

7.

Absence of immediate response to on-site and off-site emergency

Poor emergency awareness No emergency responders

Risk awareness Safety not given adequate priority Lack of risk perception

Unavailability of PPE -

EXHIBIT 5

International Journal of Management and Strategy

ISSN: 2231-0703

International Journal of Management and Strategy (IJMS) 2011, Vol. No.II, Issue II, January-June 2011

http://www.myresearchpie.com/ ISSN: 2231-0703

EXHIBIT - 6 INCIDENT SCENARIO ANALYSIS

HYDROCARBON LEAK TOOK PLACE WHY HB & MOV BOTH OPEN WHY NORMAL OPERATING PROCEDURE WAS NOT FOLLOWED

POSSIBILITY 1 DID NOT SEE HAMMER BLIND VALVE IN OPEN POSITION WHY POOR LIGHTING / ASSUMED IN CLOSED POSITION WORK AFETR DARK 6 PM KR MEENA ABSENT FROM SITE, ONLY RN MEENA PRESENT, NO COMM. BETWEEN THEM A GUPTA DID NOT SUPERVISE WHY WHY HOV WAS FULL OPEN WHY BAD PRACTICE FROM THE PAST TO CONTROL BACK PRESSURE

POSSIBILITY 2 DELIBRATE BYPASSING PROCEDURE

POSSIBILITY 3 MOV WAS PASSING

POSSIBILITY 4 HOV WAS OPEND

WHY

WHY HOV WAS OPEN LEAK STARTED WHEN HB WAS OPENED (PRESSURE OF MS IN THE LINE COULD NOT BE CHECKED AS VALVE WAS NOT PROVIDED/INSTALLED)

WHY BAD PRACTICE OF OPENING HOV FIRST MAY HAVE PREVALENT TO REDUCE PASSING EFFECT OF MOV

MOV/HOV WAS CRACKED OPEN TO PRESSURIZE LINE BEFORE TAKING DIP (HOV WAS FULL OPEN)

WHY RN MEENA WAS NOT AWARE OF THIS. OPENED HAMMER BLIND MORE

WHY RN MEENA WANTED TO PRESS CLOSE BUTTON BUT PRESSED THE OPEN BUTTON BY MISTAKE IN A STATE OF PANIC WHEN RN MEENA OPENED HAMMER BLIND MS STARTED LEAKING ON ACCOUNT OF REVERSE FLOW. (REMOTE POSSIBILITY)

International Journal of Management and Strategy

ISSN: 2231-0703