1. Perspectives on Maintenance and Asset Management in industry Do Company Boards understand the risks? Do insurers compensate the Company Boards for taking risks? Are current underwriting practices supporting mediocrity? Is there a better way?

2. About me – Steve Turner In 1977Joined RAAF at 17... Bachelor of Engineering (Aero) RMIT Worked in maintenance and reliability with the RAAF including an exchange officer post with the UK Ministry of Defence on a reliability think tank post. Left RAAF in1989 3 Years with GMH purchasing department running production improvement programs with its suppliers Graduated with MBA from Monash in 1993 (part time studies) 3 years with Price Waterhouse (now PWC) as a senior consultant

3. About me – Steve Turner Started OMCS International in 1996 Grown to be a highly respected consulting business in the area of asset management. Works in all sectors where physical assets generate the revenue. Most of our business is in Oil and Gas, Chemicals and Mining. Have been working with the power industry in Europe – focus on Nuclear Power stations.

4. The agenda Lessons learnt The ESSO Longford Disaster The BP Texas Disaster The sad response by industry Maintenance strategy explained What we typically find wrong Summary Discussion

5. The Longford Disaster - 1998

6. The Longford Disaster On 25 September 1998, at the Longford Gas Plant in Victoria, Australia, a gas absorber burst, releasing a large cloud of hydrocarbon vapours. Seconds later, it exploded. Two staff were killed and 4 million people were deprived of gas for about two weeks

7. A few graphic snaps

8. A few graphic snaps – GP09 Heat Exchanger

9. Some of the findings – Royal commission and Hopkins What would normally be considered abnormal was normalized - Hopkins Vital shut down and control mechanisms had not been working for 10 days– Other indicators were not seen as critical Engineering staff had been cut or moved to the city This led to lack of control of decision making on site The plant personnel were driven by production targets It was common practice to run the operation in the “red zone”.

10. John Boshier - Chief Executive OfficerInstitution of Engineers, Australia It has been 3 years since the Esso Longford gas plant exploded in September 1998. This passage of time has allowed Australia’s major hazard facilities to review the disaster and implement changes to ensure that such a tragedy does not re-occur. Unfortunately, according to the author of this report, the industry and the engineering profession have not learnt as much as they might have from the tragedy. Far more could be done to apply the lessons from Longford at facilities around Australia.

11. Reference to the report http://www.engineersaustralia.org.au/shadomx/apps/fms/fmsdownload.cfm?file_uuid=199C7EF9-9642-91DD-6B9D-9E1CAEB72F31&siteName=ieaust

12. The BP Texas City Disaster - 2006

13. BP Texas City Refinery Explosion March 2005 John Mogford BP - Senior Group Vice President, Safety & Operations Paper delivered at Center for Chemical Process Safety, 2nd Global Congress on Process Safety, Orlando, Florida 24 April 2006

14. Reference to the Report www.bp.com/genericarticle.do?categoryId=98&contentId=7017238

15. BP Texas City Refinery Explosion It’s not an easy story to tell. BP doesn’t come out of it well. And it’s a complicated tale involving many factors that go well beyond the process of operating a refinery safely – BP’s empowerment ethos, the behaviour of individuals in leadership and the clarity of our standards to name a few. ....

16. BP Texas City Refinery Explosion This was a preventable incident, as I will explain. It should be seen as a process failure, a cultural failure and a management failure. Our investigations have revealed significant deficiencies in the work and safety culture at Texas City. The question, of course, is why these deficiencies developed – and why weren’t they sufficiently identified and addressed before the explosion.

17. What I have learnt recently We have been in touch with BP Texas City and have had long phone conversations. I am told, they have spent $18 M USD in the last few years on consultants writing maintenance procedures and maintenance programs. They seem to have gone overboard since they simply don’t have the staff to complete the work. The real problem is they seem to have swung the pendulum too far the other way.

18. My impressions based on decades of consulting

19. My impressions of asset management in hazardous facilities... The process of asset management in hazardous plants is appalling in almost every case. This low level is considered satisfactory. The leaders of business do not understand the implications. There is a fundamental lack of knowledge about the subject: The aviation industry figured it out in the seventies but few organisations outside of aviation are anywhere close to where they should be.

20. What I observe The problems found by the Longford Royal Commissions are endemic in industry and there is not much motivation to change. The concepts of maintenance analysis are not difficult to apply yet most organisations are in complete disarray. Maintenance engineers have not had much impact: In the past, they have not articulated their needs well, and have not been good at getting improvements happening. Many are still in that situation.

21. What I suspect I suspect Company Boards don’t want to listen because they: See maintenance as an uncontrollable drain on cash which, in the past, no one has been able to manage properly, Feel that improvements in the area of reliability and maintenance may provide high returns, but prefer to take shorter term cost reduction strategies. Base decisions on bad experiences; they don’t have confidence in reliability improvement programs.

22. Some evidence showing how poor things are in general

23. Analysis of a vendor supplied maintenance program

24. Analysis of PM program for Reciprocating Compressors at a Refinery

25. Turbine and mainline pump in Saudi – Before and after labour hours per year

26. A deep water drilling company maintenance program before and after

27. The problem The fundamentals of asset integrity and reliability relate directly to the preventive and predictive maintenance programs deployed by asset managers. In over a decade of providing review programs in all industries, the common thread is that almost all companies have gaps in their programs while at the same time the over-service in others. The result is that few companies have control over the condition of their assets.

28. 28 How organisations get into trouble - the vicious cycle of reactive maintenanceTM.

29. The Birth of industrial Plant.. a Common Scenario Maintenance not involved in the design. Poor maintainability. Lack of condition monitoring considerations: Inspection facilities. Sample points. Gauges and alarms. Inadequate maintenance facilities. Design not functionally capable. etc FMECA is not seen by maintenance.

30. The Birth of industrial Plant.. cont The project runs over budget and the design capability is reduced. There is little margin between what the plant can achieve and what is expected of it. The maintenance tradesmen arrive too late for adequate training and preparation. Commissioning is done in a rush and often not fully completed.

31. After Commissioning …. The project is handed over without a maintenance program The tradesmen write one… Little input from operations No consistent method No audit trail of rationale Generally risk averse - over-servicing Page 6

32. The Infancy days… Failures happen and useless tasks are added. Operations has no buy in for the maintenance plan and there is a reluctance to cooperate. Not all the PM Program is achieved and this becomes the culture of the organisation. Temporary repairs creep in and get out of control Consultants arrive and cut heads

33. The Vicious Circle of Reactive MaintenanceTM Backlog grows PM is missed Standards Drop More preventable failures Morale Declines Resources taken by Breakdowns Head / Budget Reduction Temporary Repairs More repeat work

34. Maintenance Philosophy Explained Principles of Maintenance Analysis for Evident Failure Modes

35. Almost all assets fail in some way at some time The mechanisms of failure are referred to as failure modes. Maintenance personnel are interested in to characteristics regarding failure modes: The pattern: Wear out Random Infant Mortality Rate of deterioration Sudden Gradual

36. Age Studies (Nowlan and Heap) show that intrusive maintenance needs to be avoided.. C: Gradual 5% D: Almost Random 7% A: Bath Tub 4% E: Random 14% B: Wear Out 2% Conditional Probability of Failure F: Infant Mortality 68% Age or Life Source: United Airlines 1978

37. Step 6…. RCM Task Selection Sequence Hidden Evident Operational Loss Hazard Repair Only Condition Monitoring Condition Monitoring Condition Monitoring Condition Monitoring Scheduled Restoration Scheduled Restoration Scheduled Restoration Scheduled Restoration Scheduled Discard Scheduled Discard Scheduled Discard Scheduled Discard Failure Finding Modification Modification or No PM Modification or No PM

38. The frequency of On-Condition tasks must be less than the P-F Interval. Resistance to Failure P-F Interval (months) Potential Failure Functional Failure Check at 1 monthly intervals Age Option 1..Monitor Condition (Condition Monitoring)

39. Option 2…Fixed time replacement Safe Life The frequency of fixed time replacement must be before safe of economic life.

40. Maintenance Options for Evident Failure Modes… Age Related Failure Pattern Fixed Time Replacement only Random Gradual Sudden Rate of Deterioration

41. Maintenance Options for Evident Failure Modes… Condition Based Replacement only Age Related Failure Pattern Random Gradual Sudden Rate of Deterioration

42. Maintenance Options for Evident Failure Modes… Age Related Failure Pattern Fixed Time Replacement or Condition Based Replacement Random Gradual Sudden Rate of Deterioration

43. Maintenance Options for Evident Failure Modes… Failure will always be a breakdown Age Related Failure Pattern Random Gradual Sudden Rate of Deterioration

44. Maintenance Options for Evident Failure Modes… Age Related Failure Pattern Random Gradual Sudden Rate of Deterioration

45. Start measuring plant metrics Expected Failure Inherent Capability Loss Planned Maintenance Maintenance Capability Loss Unexpected Failure Inherent Performance Level Available Time TotalTime

46. A typical example …… Inherent Capability

47. Perspectives on Maintenance and Asset Management in industry Do Company Boards understand the risks? Do insurers compensate the Company Boards for taking risks? Are current underwriting practices supporting mediocrity? Is there a better way?