Implementing Preventive Maintenance In Oil & Gas Industry through Drone Inspection. Industrial SkyWorks May 25 th,2017

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1 Implementing Preventive Maintenance In Oil & Gas Industry through Drone Inspection Industrial SkyWorks May 25 th,2017

2 WHITE PAPER Efficient and cost effective maintenance strategy is always based on the foundations of Preventive Maintenance (sometimes referred as preventative maintenance). Such maintenance strategy has inherent benefits of improved equipment availability and reduced operational failures which are manifested as cost reductions related to asset management and asset lifecycle. Through the life management of industrial and utility assets has significantly evolved over time due to innovation and technology. For example, Unmanned Air Vehicles UAV drones have started playing their role in preventive maintenance through collection of data from locations and situations where human access is difficult or dangerous. Such hardware gadgets are providing necessary and timely input for maintenance personnel in industry such as for a gas company performing routine pipeline ROW inspection over a rocky area or an E&P company checking for oil spills or leakage in above surface wellhead gathering lines.

3 1. DEFINING COMPANY S MAINTENANCE STRAEGY Maintenance of assets and equipment entails costs which should match the desired objectives and benefit. All assets do not have failure modes that may be cost-effectively maintained using a uniform maintenance strategy. A prudent maintenance manager is required to exercise judgment in making maintenance plans and maintenance strategy through categorizing the asset into classes. As guiding principles, preventive maintenance serves little or no purpose in the case of a PLC chip-card which has a random failure having no relationship with maintenance or a coffee dispenser which serves no critical function. Therefore all equipment requiring maintenance should be prioritized on the basis of: Least Priority Assets: Equipment having minimal importance to operations and having low cost come under Run-to-Failure maintenance strategy. As an example consider a USD 500 belt feeder, whose lifetime value can be extended by 10% by servicing it every 3 months. If it is a non-critical part of a machine system, how important it is to save it and how much anybody would be willing to save USD 50? Equipment classified as runto-failure are fixed through repair, restoration or parts replacement until their replacement becomes feasible. Medium Priority Assets: Equipment that can be taken offline, inspected periodically and repaired when necessary as part of preventive maintenance strategy. However, this simple strategy can prove very costly in the long run as most of the periodic checks are found to be not required and only adds to cost of implementing the strategy. As such this strategy require annual review of schedule and sometimes support from predictive maintenance strategy to reduce the cost. High Priority Assets: High value assets / equipment having critical performance function are often put under condition-based or Predictive maintenance strategy. Starting from visual inspection this may additionally require sensors, monitoring devices, software and centralized severs to provide for continuous monitoring of the running equipment. As soon as a condition threshold is exceeded the system generates maintenance or inspection work order. The real advantage of this maintenance strategy comes in cost reduction for unnecessary downtime and concentrating resources towards critical equipment maintenance requirements. High Priority Assets with added Regulatory Compliance Obligations: A sophisticated development of predictive and preventive maintenance strategy is reliability-centered-maintenance which is highly cost intensive and usually practiced by organizations under regulatory compliance obligations and those who want to go beyond the usual performance levels of the industry. Such organizations have already developed systems of preventive and predictive maintenance and their managers believe that the equipment should continuously perform its intended function by establishing safe minimum levels of maintenance for individual machine. This strategy is based on in-depth analysis of all the possible failure modes for each machine participating in the overall operations. Oil & Gas facilities are usually managed through reliability centered maintenance.

4 2. MAINTENANCE OF ASSETS IN OIL & GAS INDUSTRY Preventive maintenance in the context of fuel supply (Oil & Gas), power supply and utility companies has very special significance such companies do not afford shutdown or blackout because of the long-term contractual supply arrangements in place with the buyers of their services and products. Their contract agreements call for heavy penalties in a short or nosupply situation. Additionally, the Regulating Authorities also impose strict compliance with respect to system efficiencies and environmental protection from exhaust gases and effluents. Only a robust preventive maintenance strategy based on time-bound checks as well as triggered by Key Performance Indicators (KPIs) for equipment, fittings, pipelines and piping systems can help avoid instances of un-authorized leakages, oil spills, equipment or fitting downtime and, in extreme cases, a catastrophic accident leading to complete system shutdown. Oil & Gas companies include companies involved in Exploration & Production (E&P or Upstream), companies involved in processing of crude or raw natural gas (Midstream) and companies involved in transportation, distributions & sales (Downstream). Oil & Gas companies usually have high value assets, handle products that are inflammable which require adherence to Compliance Standards, operate under contractual Sales-Purchase arrangements with supply chain stakeholders and have compliance obligations imposed by relevant authorities in most parts of the world. These characteristics call for reliability centered maintenance strategy to ensure compliance and fulfillment of the following: 1. Operational Responsibility - Reliability and Safety in conducting operations through adherence to Compliance Standards including OSHA 2. Business Responsibility Efficient / Profitable Operations and fulfillment of contractual obligations to avoid contractual penalties / liquidated damages 3. Environmental Responsibility Compliance to EPA, Corporate and Social Responsibility 4. Security Responsibility Security of Assets and Continuity of Business (restoration of Services and Product supplies). Security refers Physical, Cyber and Human. The complete set of operational, business, environmental and security responsibilities, at the first glance, appear to be onerous for the Oil & Gas industry. It is also to be kept in mind that Oil & Gas industry assets are often distributed geographically and these assets are a combination of static facilities, rotating machines and moving equipment. However the O&G industry has been successfully fulfilling the above mentioned four responsibilities by virtue of technical support available in the form of: Organizations like ISO, API, ANSI, ASME and CSA with regards to developed standards, specifications, guidelines and recommended procedures for design, operation, inspection and maintenance of Oil & Gas static assets like piping, valve assemblies, tanks, communication towers as well as moving assets like tankers, vessels and cylinders. These guidelines enable the operators of these static and moving assets to achieve reliable and sustainable facility operations while taking care of the regulatory and obligatory requirements.

5 OEM (Original Equipment Manufacturer) design compliance to standards / regulations and reliability testing for rotating assets like compressors, pumps and turbines. Additional support comes in the form of condition-based and time-based maintenance schedule guidelines for safe and reliable operations for rotating machines. Companies providing specialized products and services for reliability centered maintenance for static and rotating assets. Important Note: The rotating assets are always equipped with sensors, related monitoring software and gadgets reporting asset s performance parameters as well as condition-based alarms throughout the operating life of the asset. This makes it easier to schedule maintenance for these equipment and avoid failure. Unfortunately, this is not the case for static assets which require periodic checks and inspection through external resources to report the condition of the asset. Such condition checks are regularly documented and analyzed to schedule maintenance of static assets for avoidance of malfunction or mechanical failure.

6 3. TECHNICAL SUPPORT FOR MAINTENANCE IN OIL & GAS INDUSTRY API publications cover upstream maintenance requirements for offshore structures and floating production systems, wellhead equipment & tubular goods, valves and drilling and production equipment. API publications in the midstream and downstream sector covers pipeline operations and refinery equipment, including storage tanks, pressure-relieving systems, compressors, turbines, and pumps, fire & safety protection and petroleum measurement. Some of API information technology standards cover telecommunications, and information technology applications for the oil and natural gas industry. Some of the relevant API documents related to maintenance guidelines for Oil & Gas assets are listed below: API RP 51R Environmental Protection for Onshore Oil and Gas Production Operations and Leases API RP 75 Recommended Practice for Development of a Safety and Environmental Management Program for Offshore Operations and Facilities API RP 1111 Design, Construction, Operation, and Maintenance of Offshore Hydrocarbon Pipelines (Limit State Design) API Standard 2610 Design, Construction, Operation, Maintenance, and Inspection of Terminal and Tank Facilities API RP 1109 Marking Liquid Petroleum Pipeline Facilities API RP 510 Pressure Vessel Inspection API RP 570 Piping Inspection API RP 571 Damage Mechanisms Affecting Fixed Equipment in the Refining Industry API RP 572 Inspection Practices for Pressure Vessels API 579-1/ASME FFS-1 Fitness-For-Service Methods and procedures in this standard augment the requirements in API 510, API 570, Std 653, and other post-construction codes that reference FFS evaluations, such as NB-23.

7 API 579-2/ASME FFS-2 Fitness-For-Service Example Problem Manual API RP 580 Risk Based Inspection API RP 581 Risk-Based Inspection Technology API RP 583 Corrosion Under Insulation and Fireproofing API RP 585 Pressure Equipment Integrity Incident Investigation API - Std 653 Tank Inspection, Repair, Alteration, and Reconstruction API Std 689/ISO 14224:2006 Collection and Exchange of Reliability and Maintenance Data for Equipment API Std 537/ISO 25457:2008 Flare Details for General Refinery and Petrochemical Service API Publ 340 Liquid Release Prevention and Detection Measures for Aboveground Storage Facilities Canadian Standard Association (CSA) is an accredited body for provision of standards. CSA publications are also a good source of technical guideline for maintenance requirements of Oil & Gas operators. Some relevant standards are listed below: CSA Z622 CSA Z662 was officially released in 1994 and provides guidelines for design, maintenance and operations for safe energy transportation through pipelines. In Canada, federal and provincial pipeline regulations incorporate the Z662 Standard by reference, thus giving it the force of law. CSA Z662 is referenced by following oil and gas pipeline and facility regulators: the National Energy Board (for pipelines crossing provincial or international borders), and the provinces of British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, Ontario, New Brunswick and Nova Scotia

8 CSA Z246.1 Security management for petroleum and natural gas industry systems. CSA Z246.2 Now a National Standard of Canada, CAN/CSA Z Emergency preparedness and response for petroleum and natural gas industry systems CSA Z247 Now a National Standard of Canada, CAN/CSA-Z Damage prevention for the protection of underground infrastructure CSA Z276 Now a National Standard of Canada, CAN/CSA-Z Liquefied natural gas (LNG) Production, storage and handling

9 4. INDUSTRIAL SKYWORKS DRONE BASED INSPECTION SERVICES Around % of the assets used in Oil & Gas and Petrochemical industry is static line pipe, fittings, valves, piping, tanks, filter separators, pig launchers, distillation towers, flare stacks, well tubings, steel structures, etc. It is therefore not surprising that majority of failures or accidents in Oil & Gas assets have been reported due to damage or failure of these static equipment rather than rotating equipment. Mechanical failure of static equipment in the Oil & Gas assets can only be prevented through regular inspection and monitoring by qualified personnel as part of reliability centered maintenance (preventive plus condition based monitoring). Industrial Skyworks provide drone-based inspection, Non-destructive Examination (NDT / NDE) and data acquisition services for civil structures and static / fixed assets of Oil & Gas and Petrochemical plants. These drone-based field investigations provide invaluable information to the operational and maintenance managers with following added advantages: Timely reporting and investigation of damage / material loss when carried out under a defined schedule. Enhanced personnel safety by avoiding close proximity of humans to hazardous environment and dangerous locations. Firsthand information by supervisor / manager without the need to visit site location. A cost effective alternative for route reconnaissance and aerial survey requirements. Provides access to inspectors for investigations without plant shutdown requirements. May be the only option for data acquisition under an emergency / accident situation.

10 Industrial Skyworks Services Related to Asset Management Industrial Skyworks is committed to provide drone-based inspection and data acquisition technology to help the Oil & Gas industry in asset management while fulfilling their obligations as responsible corporate citizens. Following are few examples how the industry can benefit from Industrial Skyworks drone based technology: 1. Meeting Operational Responsibility Geographical distribution of assets of a petroleum transport pipeline in mountainous and dessert terrain makes it difficult and time consuming to get reliable data about asset condition. Routine inspection by pipeline walkers and vehicle-based reconnaissance teams are the classical resources available to this industry for carrying out pipeline inspection. Same is also true for system of gathering lines from wellhead to processing plants. Such inspections are time consuming, resource intensive and are prone to various human factors. The reconnaissance team, unless there is a critical issue on the pipeline requiring immediate attention, usually submits its inspection report based on the survey observations after the completion of route visit increasing the chances of error in reported observations. Often such reconnaissance visits expose personnel to physical barriers like blocked ROW, land-sliding, quicksand or unknown hazardous situations causing delays and safety hazards. In certain situations personnel may also come under security threat from criminals or miscreants. Industrial Skyworks drone-based technology efficiently performs routine inspection over petroleum transport pipeline and can instantly report to control room regarding a hazardous situation (damaged and leaking pipeline), impending damage (pipeline cover washout in mountain) or damage (fallen rock on above ground river crossing) to the asset. Regulations and standards require pipeline markings to be installed and maintained to avoid accidents caused by trespassers and this can be regularly inspected through drone flights on ROW. Thus drone-based inspection greatly enhances personnel capability to prevent failure of static asset or damage before it actually occurs. 2. Meeting Business Responsibility Efficient / Profitable Operations of a gas processing plant supplying gas to a power-plant is largely dependent on fulfillment of contractual obligations through sustained plant availability. Processing plant s availability in turn is dependent on availability of rotating assets and fixed asset in the plant. Availability of rotating assets is ensured through reliability centered maintenance strategy supported by online condition monitoring of rotating machines. However, condition of piping and fitting is largely unknown to the plant manager in the absence of scheduled NDT inspections as required under API, CSA or ANSI standards and guidelines. This problem gets aggravated when raw gas coming out of wellhead contains corrosive ingredients like H 2 S, Sulphur Mercaptans and CO 2. Gas processing plants which receive raw natural gas containing corrosive compounds are susceptible to failure due to internal corrosion of piping and fitting. Under normal wellhead operations, not requiring wellhead compression, piping and fittings are the only assets that encounter corrosion resulting in metal loss. Routine NDT inspection for wall-thickness of such assets is required to ensure that material strength does not get compromised due to

11 internal corrosion. This is also a concern for piping and fittings on offshore platforms which are prone to external corrosion and metal loss due to see-water and humidity. 3. Meeting Environmental Responsibility Compliance to EPA regulations is a must in today s business environment. Neglect in this area leads to imposition of heavy fines and a company may also get involved in damage recovery suits. Oil spills from a storage tank or transport pipeline leakage may cause severe or irrecoverable damage to environment. Such incidents are entirely related to metal loss as a result of corrosion, mechanical creep over time or mechanical damage caused by external or internal factors. Oil & Gas industry is still finding it difficult to avoid such failures reason being that non-rotating assets like valves, fittings, tanks and pipelines do not give a loud & clear indication of their deteriorated performance unlike rotating machines which generate alarms of various intensities round the clock. Industrial Skyworks drone-based reconnaissance and inspection surveys can provide the required resources at affordable cost keeping regular vigil on such damages. This solution provides improved results in prevention as well as containment of a catastrophe. Industrial Skyworks drones also prevent additional risk of deploying personnel for data gathering in a dangerous environment. 4. Meeting Security Responsibility The changing geopolitical environment of the world during past two decades has brought to light a new area of interest for Oil & Gas industry Security of Assets and Continuity of Business. Under a security threat it is always not advisable to deploy additional human resources for gathering information about security threat. Although continuity of business is only possible as a result of restoration of operation but deploying personnel in such a situation increases the risk to human life. Industrial Skyworks drone-based inspection and data collection services provide the only viable means for gathering information from an installation that is under a security threat. The information may also be required to plan rescue and revival operations. Industrial Skyworks drone-based reconnaissance performs the critical job without posing additional security threat to personnel.

12 5. ENABLING ENVIRONMENT FOR COMMERCIAL & INDUSTRIAL USE OF DRONE TECHNOLOGY DRONE REGULATIONS Any new innovation requires enabling environment for playing its desired role through regulated business operations. Same is the case with development of rules and regulations authorizing commercial and industrial use of drones. Following is a summary of developments in this area. In recognition of the significant potential for commercial use of drones in various sectors of economy, the Canadian government has incorporated / amended rules for certification and compliance requirements for UAVs as section of Canadian Aviation Regulations SOR/ United Sates FAA has issued Part-107 of the Federal Aviation Regulations in August 2016 providing guidance for Operating Requirements, Pilot Certification, UAS Certification etc for Unmanned Aircraft Systems UAS. UK Civil Aviation Authority has issued regulations related to Remotely Piloted Aircraft Systems (RPAS) issued guidance as CAP 722 Unmanned Aircraft System Operations in UK Airspace for regulating RPAS operation in UK. EASA Basic Regulation adopted in December 2016 by the European Council contains the first ever EU-wide rules for civil drones to fly safely in European airspace. This regulation contains general principles on revised common safety rules for civil aviation and a new mandate for the European Aviation Safety Agency (EASA). On the basis of these principles, the EASA will develop more detailed rules on drones through a Commission for implementing act thus making it easier to update the rules as technology develops. Rapid development of drone technology for commercial and industrial use has out-paced Policy Makers in many countries of the world. Various governments are in the process of drafting or amending existing laws and regulations for providing drone-technology access to businesses in their country. Information regarding progress done by various countries with respect to enactment of Drone Laws can be obtained from respective government authorities or such informative website.