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Light Olefins Unit Fire Damage and Rebuild Assessment

The following is an excerpt from an Interface Consulting work product issued for use in litigation, arbitration, or mediation (dispute resolution). Names, dates, and other information has been modified for client confidentiality purposes.

 

Mammoth Company Arbitration

…We have been asked to provide our comments relative to the precommissioning and commissioning work performed on the Mammoth Galveston Project....

I. Introduction

I.A. Background

Mammoth owned and operated a light olefins unit (LOU), which was located inside its larger Galveston Base Chemicals (GBC), in Galveston, Texas. Light olefins are….

On Saturday, April 29, 2006, at approximately 7:28 a.m., there was a release of hydrocarbons from the LOU, followed by a fire in the ethylene recovery area of the LOU. The fire burned for several days, resulting in extensive damage to various pieces of equipment, process and utility piping, structural steel, insulation, and instrument and electrical wiring and systems. Provided below are various pictures illustrating the fire and the resulting damage.

Mammoth’s LOU Facility

 

 

Sunderland Engineering (Sunderland) was retained by Mammoth to evaluate the damage and determine items that needed to be replaced or repaired, and items that were fit-for-service. As shown in the following image, Sunderland’s Fire Exposure Zone Drawing, the most severe fire/heat exposure and, therefore, the most significant damage, occurred in the northwest side of the LOU, which generally included....

 

Sunderland’s Fire Exposure Zone Drawing

 

As shown in the following organization chart, Mammoth contracted with Trinity Mechanical (Trinity), the designer of the original GBC LOU in 1979, to provide engineering and procurement services for the fire rebuild work. Mammoth also contracted with....

 

 

I.B. The Dispute

The fire at Mammoth’s LOU caused extensive property damage and resulted in significant repair costs and lost production and income due to the plant being shut down....

We understand that Mammoth has submitted claims to the Reinsurers of approximately $297.6 million to rebuild the LOU and approximately $370.3 million in business interruption losses. To date....

I.C. The Commissioning Phase

The process of starting up a new or modified facility, such as the GBC LOU, is....

As shown in the graphic below, precommissioning/commissioning is an essential element of safely and efficiently starting-up a facility such as the GBC LOU, and cannot be avoided.

 

 

Precommissioning occurs after construction has achieved mechanical completion, and....

 

II. Summary of Opinions

We relied upon my extensive experience in project/construction management, our experience and knowledge in engineering and constructing industrial and chemical plants, and our education in engineering and business (MBA) to perform the evaluation and analysis of the issues discussed in this opinion. As a....

 

The following bullet points summarize our initial observations and opinions relative to the commissioning issues on the GBC Project:

  • Ethylene plants require a high standard of cleanliness, dryness, and....

  • The Occupational Safety Health Administration (OSHA) requires companies such as Mammoth to conduct safety reviews prior to starting up industrial facilities such as the LOU. In addition....

  • The fire on April 29, 2006, damaged multiple process, utility, electrical, instrument, and control systems; thus resulting in a sudden and unplanned shutdown of the LOU and....

  • Commissioning planning for new or modified facilities requires sufficient engineering and….

  • Mammoth’s February 2007 cost estimate for commissioning and training was approximately $39 million. This is the....

  • Final commissioning and training costs were approximately $42 million, which is close to the....

  • Mammoth’s commissioning program was methodical, well-planned, and successfully executed. Interface Consulting understands that....

 

III. Discussion of Opinions

...

III.A. Mammoth’s Detailed and Methodical Approach to Commissioning

Precommissioning activities are those activities that take place after construction and mechanical completion, and which prepare the systems for commissioning. The purpose of precommissioning is to ensure that the plant, as transferred from construction to the commissioning group, is safe and constructed per the design intent....

A successful commissioning outcome is best achieved by diligent planning and proper implementation of the commissioning plan. Trinity initially focused on defining the 79 commissioning systems, several of which were subdivided into subsystems, as shown in the following table.

 

This methodical approach systematically divided the entire facility into more manageable discreet systems. As illustrated in the graphic below, each commissioning package typically included the following, as applicable for each system:


Contents of a Typical Mammoth Commissioning Package

 

...

III.B. Ethylene Plants Require a High Standard of Cleanliness, Dryness, and Leak Integrity

...

III.C. Mammoth Complied with OSHA Requirements Pertaining to Written Procedures

OSHA regulation 1910.119 requires owners to develop and implement written operating procedures that provide clear instructions for….

III.D. The Nature of the Fire Necessitated Commissioning the Entire LOU and Other Systems

...

III.E. Meaningful Commissioning Estimates Require Sufficient Engineering and Procurement Progress

We understand that various commissioning estimates were prepared on the project. As the following graphic illustrates, an initial figure of....

 

...

III.F. Commissioning Process was Methodical and Successful

...

 

IV. Conclusions

...
 

V. Signature

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