BP 2006 Annual Report Download - page 30

rIn a study by Corporate Research International, US consumers
ranked BP’s convenience chain in the US as the best for
customer service.
– BP completed the disposal of its shareholding in Zhenhai Refining and
Chemicals Company to Sinopec, sold its shareholding in Eiffage, the
French-based construction company, and completed the disposal of its
network of 70 retail sites in the Czech Republic.
– BP also announced its intention to sell the Coryton refinery in the
UK, which processes 172,000 barrels of crude oil per day. On
1 February 2007, we announced that the sale of the refinery to
Petroplus Holdings AG had been agreed, subject to required regulatory
approvals. The sale includes the adjacent bulk terminal and BP’s UK
bitumen business which is closely integrated with the refinery.
Completion of the sale is expected in mid-2007.
Texas city refinery
Summary
Throughout 2006, BP continued to respond to the 23 March 2005 incident
at its Texas City refinery. BP addressed a number of the factors that
contributed to the incident, including the announcement of a new policy
for the siting of occupied portable buildings and the removal from service
at Texas City of all blow-down stacks handling heavier-than-air light
hydrocarbons. BP also implemented a number of actions relating to
safety and operations, not only at US refineries but also at other facilities
worldwide. These actions include a decision to increase spending to an
average of $1.7 billion a year over the next four years to improve the
integrity and reliability of US refining assets, the formation of a safety and
operations function to focus on operations and process safety across the
group, the appointment of a new chairman and president of BP America
Inc. and the creation of an advisory board to assist BP America Inc.’s
management in monitoring and assessing BP’s US operations (see Action
on process safety across BP on page 40). Also in 2006, BP settled a large
number of civil suits arising from the Texas City incident. BP established
a $1.625 billion provision related to the incident and reached settlements
with all the relatives of those who were killed and with hundreds of other
persons who filed injury claims. Trials have been scheduled for a number
of unresolved claims in mid-2007, although to date all claims scheduled
for trial have been resolved in advance of trial.
In 2006, BP continued its co-operation with the governmental entities
investigating the incident, including the US Department of Justice (DOJ),
the US Environmental Protection Agency (EPA), the US Occupational
Safety & Health Administration (OSHA), the US Chemical Safety and
Hazard Investigation Board (CSB) and the Texas Commission on
Environmental Quality (TCEQ). During 2006, BP also devoted significant
time and effort to co-operate with the BP US Refineries Independent
Safety Review Panel (the panel), which it chartered in 2005 on the
recommendation of the CSB, to assess the effectiveness of corporate
oversight of safety management systems at BP’s US refineries and the
corporate safety culture. The panel published its report in January 2007
and BP has committed to implement its recommendations
(see Report of the BP US Refineries Independent Safety Review Panel on
page 29).
Background
The March 2005 explosion and fire at BP Products North America Inc.’s
Texas City refinery occurred in the isomerization unit of the refinery as the
unit was starting up after routine planned maintenance. The incident
claimed the lives of 15 workers and injured many others.
An internal BP incident investigation determined that the raffinate
splitter at the isomerization unit was overfilled and overheated, causing
the relief valves to open into the blow-down system and resulting
in an overflow of liquid hydrocarbon from the blow-down stack. The
resulting vapour cloud was ignited by a source that has not been
definitively identified.
BP’s incident investigation team found that the critical factors leading to
the incident included over-pressurization of the raffinate splitter, resulting
in loss of containment, the failure to follow procedures during the start-up,
the placement of temporary trailers too close to the blow-down stack and
the design and operation of the blow-down stack. The investigation team
issued a comprehensive final report, which is available in full on the BP
internet site, www.bpresponse.org. The final report identified a number
of underlying causes related to the working environment, process safety
and other management and operational behaviours and processes at the
Texas City refinery.
The investigation team recommended numerous changes relating
to people, procedures, control of work and trailer siting, design and
engineering, underlying systems and investigation and reporting of
incidents. The Texas City refinery established a programme office to
implement the recommendations from this report and to address other
projects needed to enhance the safety and performance of the refinery.
In addition, in the immediate wake of the incident, a new Texas City site
manager was appointed in May 2005. That manager has been succeeded
by a permanent replacement, whose tenure at the refinery began in
the first quarter of 2007. Steps were taken following the incident to
strengthen the leadership team, clarify responsibilities and introduce
systems to improve communication and compliance. All occupied
trailers have been removed from specified areas, an enhanced training
programme is under way and the site has committed to restarting
process units without any blow-down stacks in heavier-than-air light
hydrocarbons.
The incident prompted a number of investigations by other state and
federal agencies. The TCEQ and OSHA investigations of the incident
resulted in settlement agreements between BP and the agencies. In the
third quarter of 2005, BP reached a settlement with OSHA that resulted
in the payment of a $21.4 million penalty, an agreement to correct all
alleged safety violations and the retention of experts to assess the
refinery’s organization and process safety systems. In the second
quarter of 2006, BP settled with the TCEQ, resolving 27 alleged violations
by paying a $0.3 million fine and agreeing, among other things, to upgrade
its flare system.
In August 2005, the CSB issued an urgent recommendation to BP to
establish an independent panel to assess and make recommendations
regarding BP’s corporate oversight of safety management systems at
its five US refineries and its corporate safety culture. BP established
the panel in October 2005, chaired by former US Secretary of State
James A Baker, III, and co-operated fully with the panel. In order to
make a thorough and credible assessment, the panel visited all BP’s US
refineries, commissioned independent process safety audits, interviewed
staff at all levels, including operators and refinery managers and
leadership teams, conducted an extensive process safety cultural survey
and reviewed tens of thousands of documents.
BP expects the CSB to issue its final report in March 2007,
supplementing two interim reports of findings. At a news conference
on 31 October 2006, the CSB issued an update on the status of its own
20-month investigation into the causes of the incident and also issued
recommendations to the American Petroleum Institute (API) to amend its
guidance relating to atmospheric relief systems and to OSHA to establish
a national emphasis programme promoting the elimination of unsafe
systems in favour of safer alternatives.
The DOJ is investigating whether the Texas City incident involved
any criminal conduct. The DOJ has issued Grand Jury subpoenas for
documents and testimony. The investigation, with which BP is
co-operating, is ongoing.
The refinery was entirely shut down in September 2005 in anticipation
of Hurricane Rita. The hurricane caused the loss of steam and power to
the refinery and these services were not fully restored until December
2005. The site-wide shut-down of the Texas City refinery also affected the
Aromatics and Acetyls business, which has a co-located manufacturing
capacity of paraxylene (PX) and metaxylene. The PX unit resumed
production in March and the metaxylene unit resumed in April 2006.
The remaining PX capacity at Texas City has been restarted in line with
the ongoing phased recommissioning of the refining units.
Throughout the period from September 2005 to the end of the first
quarter of 2006, BP worked to understand the extent of the damage
the hurricane and loss of power had caused and put into place detailed
plans to effect repair and safe restart of the process units. This was a
considerable task, involving the entire workforce at the site plus
significant external engineering resources.
At the end of the first quarter of 2006, the refinery restarted
production and reached an average throughput of 248,000 barrels per day
in the fourth quarter of 2006. The site started up smoothly and
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