Catalyst Damage - Did the Operator Incur an "Extra" Turnaround

Insurance Claim, Middle East

June 1, 2022

Most refining and petrochemical processes require specialized catalysts that promote the chemical reactions needed to convert feedstocks into the desired products. Over time, these catalysts become fouled, usually by feedstock contaminants and deposits from side reactions, and gradually lose their efficacy (“activity”). Eventually, catalyst activity deteriorates to a point where it must be replaced, which typically requires a complete operating unit outage. Operators usually replace catalysts and perform other major maintenance activities that require outages; these planned outages are called “turnarounds.”

Operators forecast catalyst cycles and   equipment repair requirements to develop   long-term (5- to 20-year) turnaround   plans. However, the operating periods   between turnarounds can be shortened or   extended based on:  (1) actual unit and   catalyst performance, (2) overall market   economics, or (3) the availability of   contract maintenance and specialized   technical personnel and equipment   required during turnarounds. Hence,   performing a turnaround a few months earlier than planned may or may not constitute an “extra” turnaround.

A petrochemical complex experienced a sudden and extended complex-wide outage. After restarting operations, the catalyst in one processing unit showed significant activity loss and declining product yields. Following several months of deteriorating performance, the operator shut the complex down to replace the impaired catalyst and perform additional repairs and inspections. The operator filed an insurance claim that included economic damages stemming from the initial outage, impaired operating yields and throughput, and an “extra” turnaround for shutting the complex down early for catalyst replacement and equipment repairs.

Baker & O’Brien was engaged to review the followings aspects of the disputed claims: (1) unit production losses, (2) mitigating actions taken by the operators to offset the yield loss and keep other units at planned production levels, and (3) how the early shutdown impacted the long-term turnaround plan. 

We submitted several technical memoranda and participated in discussions between the insurance market and operator. The two sides settled.