Highly Specialized Steel Alloys Inflate Repair Costs

Insurance Claim, Middle East and Africa

An insurance claim followed an explosion and fire at a petrochemical complex. Due to the extent of the damage, several difficult engineering problems were encountered. The claim was complicated by the cost associated with repairing and replacing equipment constructed of specialized steel alloys.

A large petrochemical complex suffered an explosion and fire that caused extensive damage to a chemical processing unit. In addition to the process equipment itself, facilities affected included piping and support structures, as well as electrical and control circuits. A stainless steel distillation tower was so badly damaged that, had it not been for the surrounding steel structures, it might have suffered a complete collapse.

Following the incident, the owner conducted a "root cause" analysis. Extensive metallurgical and laboratory testing of damaged components led to the conclusion that a valve casting had suddenly and catastrophically failed due to a metallurgical fault. Severe process conditions were also determined to have been a contributing factor in the failure mechanism. After initiating mitigation measures to avoid a reoccurrence, the owner filed an insurance claim and proceeded to execute the repairs. However, because the facility's process equipment was constructed of stainless steel and other special alloys, the repair costs significantly exceeded those of a more conventional processing plant.

Baker & O'Brien was engaged to: (1) review the owner's causation investigation and conclusions; (2) review the proposed scope of repairs, estimated costs, and schedule compared to what should be expected for a unit of this type; and (3) monitor the repairs on site while they were being conducted. One of the key decisions was whether to repair the distillation tower standing in place-which presented several difficult engineering problems-or remove it and repair it on the ground. Once the option was chosen, our consultants reviewed the proposed repair procedures, with emphasis on the tower support and alloy welding issues. Cost escalations due to special metallurgical considerations were compared to industry metrics. Our efforts assisted the parties in reaching a mutually satisfactory settlement for the claim.

Charles J. Hirst

Executive Vice President

Chemicals and Petrochemicals
Insurance Claims / Accident / Incident Investigation / Litigation / Physical Asset Appraisal / Quantum/Damages Assessment
Middle East and Africa