Liga Asuransi – Dear readers, how are you? I hope your business is running well as expected.
Within a month, three fires happened in various locations in PERTAMINA’s assets and facilities. First, on March 3rd, 2023, A fire in Plumpang Jakarta, and the second was a fire on a fuel transport ship in Mataram (26/3/2023) last week.
And the third, On the 1st of April 20023, an oil refinery in Dumai owned by PT Kilang Pertamina Internasional (KPI) Refinery Unit (RU) Dumai was on fire. 5 Workers have been Injured. No details of the properties, facilities, and other casualties damaged so far.
It was reported that the fire was under control at around 22.54 WIB.
The cause of the incident is still under investigation, and the emergency team is still working to ensure that conditions at the site are safe.
As the impact of this fire, refinery operations in the affected units have been suspended to ensure safety at the site. Meanwhile, the processes of other teams continue to run normally.
As a senior insurance broker, I am concerned about these three accidents. Many property losses occurred, loss of lives and injuries, damage to oil transportation facilities, loss of oil stocks, environmental damage, general disturbances, and cause fuel supply disruption.
This time I would like to discuss more the causes of this accident at Dumai Refinery and the risk management and insurance coverage related to this accident. This article can assist all oil refineries operators in preventing the same accident from happening in the future.
If you are interested in this article, please share it with your colleagues so they understand like you.
UNDERSTANDING THE OIL REFINERY PROCESS
Before we go further, let’s understand that the operation of an oil refinery is an industrial facility that processes crude oil into various petroleum products.
Numerous safety measures are in place to prevent accidents and reduce the risk of fires and explosions. The refining process is complex and involves many steps and different types of equipment, including distillation towers, catalytic crackers, and various chemical reactors.
Here is a general overview of the process:
- Distillation
The crude oil is heated to very high temperatures in a distillation tower to separate it into different components based on their boiling points. This process produces fractions such as naphtha, kerosene, diesel, and heavier residual oil.
- Conversion
Some fractions produced in the distillation process are converted into more valuable products using various methods such as cracking, reforming, and hydroprocessing. For example, cracking breaks down heavier molecules into lighter ones, while reforming rearranges the molecular structure of some fractions to produce higher-quality gasoline.
- Treating
The various fractions are then treated with chemicals to remove impurities such as sulfur, nitrogen, and metals. This process is crucial in reducing the environmental impact of the refinery’s products and ensuring that they meet regulatory standards.
- Blending
The final step is to blend different fractions to produce various petroleum products such as gasoline, diesel fuel, jet fuel, and lubricants.
THE RISKS OF OIL REFINERY OPERATIONS
Oil refineries need to implement safety measures to prevent these risks and have emergency response plans to minimize the impact if incidents occur.
Oil refinery operations can be hazardous to both human health and the environment. Here are some of the potential risks:
Fire and explosion
Oil refineries deal with flammable and combustible materials, which can cause fire or explosions. Such incidents can lead to severe injury or loss of life.
- Toxic gas emissions
Oil refineries emit various toxic gases, including sulfur dioxide, nitrogen oxides, and carbon monoxide, which can harm human health and the environment.
- Oil spills
Accidental spills can occur during crude oil transportation, storage, and processing, resulting in environmental pollution and damage to aquatic life.
- Corrosion and equipment failure
Due to the harsh chemical environment, refinery equipment like pipes and tanks can corrode over time. This can lead to leaks or ruptures, which can cause significant damage.
- Occupational hazards
Oil refinery workers are at risk of exposure to harmful chemicals, physical hazards such as heat and noise, and ergonomic injuries from repetitive tasks.
- Terrorist attacks
Oil refineries are considered critical infrastructure and vulnerable to terrorist attacks. Such attacks could cause widespread damage and loss of life.
WHAT ARE THE CAUSES OF THE FIRE AND EXPLOSION AT THE OIL REFINERY?
Oil refineries need robust safety protocols and emergency response plans to prevent and mitigate fires and other incidents. Proper training, regular maintenance, and inspections can help identify and address potential hazards before they lead to accidents.
With specific information about a particular oil refinery fire, it is easier to determine the exact cause.
However, some of the common causes of fires at oil refineries include:
- Equipment failure
Refinery equipment such as pumps, valves, and pipelines can fail, leading to leaks and fires.
- Human error
Human error during maintenance, inspection, or operations can lead to accidents, including fires.
- Electrical issues
Electrical equipment can spark and ignite flammable materials, causing fires.
- Natural disasters
Natural disasters such as hurricanes, earthquakes, and floods can damage refinery infrastructure and cause fires.
- Sabotage or terrorism
Sabotage or terrorism can target oil refineries, causing fires and other damage.
As the investigation of the PERTAMINA Dumai refinery is ongoing, we have no information on the leading cause of the fire or the explosion.
EQUIPMENT FAILURE
It is essential to properly maintain and inspect equipment at an oil refinery to prevent these types of failures from occurring. In addition, oil refinery operators must have safety protocols to detect and respond to equipment failures quickly to prevent fires and other accidents.
Equipment failure can cause a fire at an oil refinery plant in a few ways:
- Leaks
If equipment such as pipes, valves, or tanks fail, they can release flammable liquids or gases. If these leaks meet an ignition source, such as a spark or flame, they can ignite and cause a fire.
- Overheating
Equipment such as pumps or motors can overheat if not properly maintained or operated beyond their design limits. If this happens, the excess heat can ignite flammable materials, causing a fire.
- Friction
Moving parts in equipment can generate friction, which can create heat. If the equipment is not adequately lubricated or maintained, this heat can build up and ignite flammable materials.
- Electrical issues
Electrical equipment, such as wiring or motors, can fail and cause sparks or arcs. These sparks or arcs can ignite and cause a fire if they encounter flammable materials.
HUMAN ERRORS CAUSE
Training employees in safe operating procedures and enforcing strict safety protocols is essential to prevent human error from causing a fire in an oil refinery plant.
Additionally, regularly inspecting equipment and maintaining it properly to prevent failures is essential. Finally, implementing safety checks such as no smoking or open flames in prohibited areas and flammable materials storage and handling procedures can help reduce the risk of a fire caused by human error.
Human errors can cause a fire in an oil refinery plant in several ways:
- Improper maintenance
If equipment is improperly maintained, it can fail and cause a fire. For example, if valves are not regularly checked or lubricated, they may become stuck or leak flammable materials.
- Inadequate training
Employees not adequately trained in safe operating procedures may inadvertently cause a fire. For example, they may use equipment in a way that is not intended, or they may use the wrong tools or chemicals.
- Improper handling of flammable materials
Employees who handle flammable materials must follow strict safety protocols to prevent fires. If they do not properly store, transport, or handle these materials, they may cause a fire.
- Neglecting safety procedures
If employees neglect safety procedures, such as failing to wear protective clothing or not following safety protocols during maintenance or repair work, they may cause a fire.
- Smoking or using open flames in prohibited areas
Smoking or using open flames in prohibited areas can ignite flammable materials and cause a fire.
ELECTRICAL ISSUES
To prevent electrical issues from causing a fire in an oil refinery, it is essential to regularly inspect and maintain electrical equipment and wiring to ensure they are in good condition. Additionally, electrical equipment should be operated within its design limits to prevent overheating, and appropriate grounding should be used to prevent electrical arcing.
Lightning protection systems can also be installed to help prevent lightning strikes from causing damage. Finally, it is essential to have an emergency response plan in case of a fire caused by electrical issues.
Electrical issues can cause a fire at an oil refinery in several ways:
- Electrical shorts
Electrical shorts can occur when a hot wire comes into contact with a grounded surface, creating a spark that can ignite flammable materials. This can happen due to damaged or worn insulation, overloaded circuits, or other issues with electrical wiring.
- Electrical arcing
Electrical arcing can occur when electricity jumps across a gap between two conductors, creating a spark that can ignite flammable materials. This can happen when electrical equipment is not grounded correctly or if there is damage to the electrical wiring or equipment.
- Overheating
Electrical equipment such as motors, transformers, or circuit breakers can overheat and cause a fire if properly maintained and operated beyond their design limits.
- Lightning strikes
Lightning strikes can damage electrical equipment and cause a fire.
SABOTAGE AND TERRORISM
Sabotage or terrorism can be a deliberate act to cause a fire in an oil refinery plant.
To prevent sabotage or terrorism from causing a fire in an oil refinery plant, it is essential to implement robust security measures to deter or prevent such acts. This can include securing the facility with barriers, fences, and security personnel, implementing security protocols for employees and contractors, and monitoring the facility for suspicious activities or behaviors.
Regular drills and training sessions can help employees prepare for emergencies and respond effectively to potential threats.
Such an act can be carried out in several ways:
- Explosives
Terrorists or saboteurs may use explosives to cause a fire or an explosion in an oil refinery plant. This can be done by planting explosives near storage tanks or other critical infrastructure or by using vehicles or drones to deliver explosive devices to targeted locations.
- Arson
Arson is the intentional setting of fires to cause damage or destruction. Saboteurs may use arson to fire equipment or infrastructure at an oil refineries plant, such as storage tanks, pipelines, or processing units.
- Cyberattacks
Saboteurs may use cyberattacks to disable safety systems or critical equipment at an oil refinery plant, leading to a fire or explosion. This can be done by hacking into the plant’s computer systems, disabling safety protocols, or disrupting the plant’s electrical systems.
THE REFINERY FIRE ACCIDENTS IN INDONESIA
list of some significant fire accidents that have occurred in oil refineries in Indonesia in the past:
- In 2016, a fire broke out at the Cilacap oil refinery in Central Java, forcing the facility to shut down temporarily. No casualties were reported.
- In 2014, a massive explosion occurred at the Balongan oil refinery in West Java, causing a fire that burned for several days. The incident resulted in at least 47 deaths and dozens of injuries.
- In 2012, a fire broke out at the Plaju oil refinery in South Sumatra, which led to a temporary shutdown of the facility. No casualties were reported.
- In 2009, a fire occurred at the Balikpapan oil refinery in East Kalimantan, forcing the facility to shut down for several days. No casualties were reported.
TYPE OF INSURANCE NEEDED FOR AN OIL REFINERY PLANT
Oil refinery plants require several types of insurance to protect against potential risks and liabilities.
The specific insurance needs of an oil refinery plant may vary depending on factors such as the size and location of the plant, the type of products produced, and the potential risks associated with the operations.
An oil refinery plant must work with an experienced insurance broker to identify the appropriate coverage options to meet its needs.
Here are some of the types of insurance that an oil refinery plant may need:
Property insurance covers damage or loss to the physical assets of the refinery plant, including buildings, equipment, pipelines, and storage tanks.
Liability insurance protects against claims and lawsuits for injuries or damages that may arise from the refinery’s operations. This can include coverage for third-party bodily injury, property damage, environmental pollution, and product liability.
- Business interruption insurance
Business interruption insurance covers lost revenue and other expenses incurred during downtime due to a covered event, such as a fire, natural disaster, or equipment failure.
- Workers’ compensation insurance
Workers’ compensation insurance provides coverage for employees who are injured on the job or suffer from work-related illnesses.
D&O insurance covers the personal liabilities of directors and officers of the refinery plant, such as lawsuits arising from decisions or actions taken in their official capacity.
- Cyber insurance
Cyber insurance covers losses or damages arising from cyber threats and data breaches, including liability for violations of personal information and business interruption due to cyber-attacks.
Almost all the types of the above insurance should be responded to this accident except cyber security insurance.
THE ROLES OF AN INSURANCE BROKER IN CLAIM SETTLEMENT ON THE FIRE OF AN OIL REFINERY PLANT
An insurance broker is essential in the insurance claim settlement process for an oil refinery fire. Here are some of the key responsibilities of an insurance broker:
- Initial Assessment
When an oil refinery plant experiences a fire, the insurance broker will be one of the insured’s first contact points. The broker will assess the situation and guide how to proceed with the claim process.
- Claims Advocacy
The insurance broker will work closely with the insured to prepare and present the claim to the insurance company. This includes providing documentation of damages and losses, negotiating with the insurance company on behalf of the insured, and advocating for the insured’s interests throughout the claims process.
- Risk Management
The insurance broker will provide ongoing risk management advice to the insured to help prevent future losses and mitigate the risk of another fire or other damages. This may include recommendations on risk management strategies and insurance coverage options.
- Access to Insurance Markets
An insurance broker has access to multiple insurance markets and can help the insured find the best coverage options at the most competitive rates. This is important in the event of a fire, as the insured may need to obtain additional insurance coverage or review their current coverage to ensure it is adequate.
- Claim Settlement
The insurance broker will assist the insured in negotiating a settlement with the insurance company that is fair and adequate to cover the damages and losses incurred as a result of the fire. This includes working with the insurance company to ensure the claim is processed promptly and efficiently.
The insurance broker advocates for the insured throughout the insurance claim settlement process for an oil refinery fire.
The broker’s role includes providing guidance, advocacy, risk management advice, access to insurance markets, and assistance negotiating a fair settlement with the insurance company.
This article is presented by:
L&G Insurance Broker, a leading insurance broker in Indonesia focusing on oil and gas risks
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