Building a risk model for midstream shale gas assets.

Author:Murray, Jake
 
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Access Midstream has identified a need for a broad-spectrum risk model for its pipeline assets. This business need extends beyond the requirements mandated by the federal Department of Transportation (DOT) and state regulatory agencies.

Regardless of regulatory status, all pipeline assets carry some risk, and even unregulated pipelines can carry a level of risk that may require mitigation for prudent operation. In addition to providing a tool to aid in protecting Access' assets, risk management drives health and environmental safety decisions, protecting the company's acceptance in the communities it operates in. In other words, risk-based decision-making can enhance the company's ability to maintain its social license to operate.

This article outlines the business needs and approach with regard to risk assessment on its pipeline assets. Access is developing an in-house risk solution that works for midstream gas and oil gathering, while still remaining flexible enough to provide the same value to its regulated transmission assets.

The focus has been on designing a model for quantitative risk assessment that employs existing data. The model must distinguish between high- and low-risk lines, but should also generate almost real-time, actionable results that can be evaluated along with established risk protocols. With assets expanding quickly, the assessment tool must use automated processes that are scalable with the company's growth.

Shale Plays

To develop a solution addressing the needs of a gathering company, traits that define the criteria for an applicable risk model must be defined. Access' assets are primarily in shale gas plays, gathering product from single and multiple wellhead pads. The company operates in several states, including Arkansas, Kansas, Louisiana, Ohio, Oklahoma, Pennsylvania, Texas, West Virginia and Wyoming (Figure 1).

Some businesses may devote 10% or more of annual operating expenses and capital to carrying one product from Point A to Point B on a single pipeline. Others devote entire budgets to thousands of pipelines, but do so in nearly identical conditions with nearly identical products. As a diversified midstream company, Access must have a model that handles different commodities, materials, segment types and operating environments. Figures 2 through 5 illustrate the diversity of materials, products and locations that must be considered.

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Access pipeline assets include nearly 6,000 operationally unique pipeline assets and more than 6,000 miles of pipe. The total pipeline mileage increases by an average of 747 miles of pipe a year through construction and acquisitions, so the risk model must be scalable.

It is unusual for an unregulated operator, such as Access, to include integrity inspection data for many of its pipelines. Figure 8 illustrates the relative proportions of Access' regulated and unregulated assets. Additionally, Access' pipelines are relatively young (as shown in Figure 7), compared to other systems that have the benefit of decades of operations and maintenance data. For the model to estimate failure rates from a variety of threats, it must rely primarily on other widely available data.

Rates such as mils per year (MPY) of internal corrosion, line strikes per mile-year on rights-of-way (ROW) and coating failures per square foot are not always known, as many assets are new. For most cases, these values are not available and must be inferred from other sources. For example, internal corrosion rates may be based on bacteria samples, product flow rates, partial pressures of corrosive gases and the presence of chemical treatment.

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Discussion Of Risk Model

Many criteria shape the functions of a valuable risk model; there are guidelines for prioritizing assessment in an integrity management plan that ensure protection for the public from serious environmental and safety consequences. DOT provides requirements in the Code of Federal Regulations (CFR), Title 49, Parts 192 and 195. Part 192 references the American Society of Mechanical Engineers (ASME) standard B31.8S, Section 5, which provides useful detail on traditional threats that should be included. American Petroleum Institute (API) Recommended Practice (RP) 1160 provides some risk management guidelines for hazardous liquid pipelines.

The scope of risk management prescribed in these documents is mostly directed to categories of pipelines of greatest concern such as transmission lines and lines in high-consequence areas (HCAs).

However, these categories do not fully capture additional high-risk elements that would be applicable to an enterprise risk management strategy for a midstream operator, such as the cost of down time for repairs, inability to consistently meet business obligations, value of lost commodity and adjacent property and structure damage costs. Therefore, it is important for a risk model to extend beyond minimum considerations....

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