FITNESS‐FOR‐PURPOSE ASSESSMENT GUIDELINE Prepared under the Petroleum and Geothermal Energy Act 2000 (SA) June 2012 

DMITRE | Fitness-for-Purpose Assessment Guideline

Energy Resources Division

Resources and Energy Group

Department for Manufacturing, Innovation, Trade, Resources and Energy (DMITRE)

Level 6, 101 Grenfell Street, Adelaide

GPO Box 1264, Adelaide SA 5001

www.petroleum.dmitre.sa.gov.au

Phone: (International) +61 8 8463 3204

(National) (08) 8463 3204

Fax: (international) +61 8 8463 3229

(National) (08) 8463 3229

Contact Michael Malavazos

Director Engineering Operations, Energy Resources Division

Phone: (08) 8463 3245, Email: michael.malavazos@sa.gov.au

Compiled by Michael Jarosz, Senior Engineer, Energy Resources Division, DMITRE

DMITRE Fitness-for-Purpose Assessment Guideline 1

Introduction

The intent of this guideline is to aid DMITRE’s Energy Resources Division in validating licensees’ five yearly fitness-for-purpose (FFP) assessments of their facilities, as required by Regulation 30 of the Petroleum and Geothermal Energy Act 2000 (the Act).

The aim of the FFP provisions is to ensure that licensees exercise an adequate duty of care in the design, construction, operation and maintenance of their facilities, for the purpose of satisfying the public health and safety, environment and reliability of gas supply requirements of the Act.

To facilitate the achievement of this objective, Regulation 30 of the Act specifically requires FFP assessments to address three key areas:

1. The physical condition/integrity of facility equipment and utilities

Regulations 30(3)(a), 30(3)(e), 30(6)(d)(i);

2. The effectiveness of the facility’s management and maintenance systems

Regulations 30(3)(b), 30(6)(d)(ii);

3. The management of risk to ensure safe and effective operation of the facility

Regulations 30(3)(d), 30(6)(c).

This guideline has been prepared to aid DMITRE in validating licensees’ FFP reports in relation to these key areas.

Step 1

Review the FFP report and complete the Regulation 30 checklist in Attachment 1 to ensure the requirements of the Act have been satisfied.

DMITRE Fitness-for-Purpose Assessment Guideline 2

Step 2

Complete the FFP Review checklist in Table 1 (page 3) which specifically addressed the three key areas of:

1. The physical condition/integrity of facility equipment and utilities;

2. The effectiveness of the facility’s management and maintenance systems;

3. The management of risk to ensure safe and effective operation of the facility.

Comments should consider the following:

Whether the report has sufficiently addressed the specified criteria (if relevant).

Whether any clarification is required. Whether further information required to confirm the licensee’s FFP

conclusion. The type of validation activities to be undertaken by DMITRE to confirm the

licensee’s FFP conclusion.

When completing the checklist in Table 1 it is necessary to consider the risks associated with the activities. It is Important to note that not all items in Table 1 may be applicable to all operations and the reviewer should consider the risk profile of the facility when determining requests for further information.

DMITRE’s requests for further information or validation activities may include the following:

Requesting audit reports, risk assessment reports, integrity management reports or any other reports that may be relevant.

Undertaking office and/or field based inspections. Attending office and/or field based audits conducted by the licensee.

Additional Notes

DMITRE to focus the FFP review on the most serious risks (especially low probability high consequence events) of operating the facility, and check that the licensee has exercised adequate duty of care in:

o Effectively identifying and managing risks associated with conducting regulated activities under the Act.

o Implementing effective preventative and mitigative risk management measures.

DMITRE to focus on licensees providing an adequate demonstration that serious risks associated with operating the facility are being managed to an acceptable level.

DMITRE Fitness-for-Purpose Assessment Guideline 3

Table 1: FFP Review Checklist

Component DMITRE Comment

Risk Assessment and Management

1. Major incident/process safety focus.

1.1 Risk assessments and reviews

a) Was a comprehensive risk assessment of the facility conducted at the design stage of project development? What is the frequency of risk assessments and reviews?

b) What is the rationale of scheduling risk assessments and reviews? For example, are reviews initiated following significant change with a maximum allowable interval of 5 years?

c) Are risk assessment workshops independently facilitated?

d) Who attended the risk assessment workshops? Check whether DMITRE attended the session? Was the session attended by a suitable cross-section of personnel consisting of office based engineering personnel and field staff representing all pertinent fields (e.g. electrical, mechanical, etc)?

e) Have risk assessments been conducted in accordance with a relevant industry standard, such as AS2885 or AS/NZS ISO 31000?

f) What risk assessment method was used? For example: Layer of Protection Analysis (LOPA), Hazard and Operability Study (HAZOP), Safety Management Study (SMS), Quantitative Risk Assessment (QRA)? Was the method appropriate to the application?

g) Were the actions resulting from the assessment:

o Recorded? o Assigned to an individual?

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o Risk ranked? o Satisfactorily addressed?

h) Is a summary of major risks provided in the FFP report, including consequence and likelihood? Depending on the risk profile of the facility, this may need to include a list of Major Accident Events (MAEs).

i) What is the risk profile used by the licensee? Review the licensee’s risk matrix and ascertain what has been considered. What constitutes an acceptable risk according to the licensee?

j) For the most serious risks associated with the operation of the facility, as identified by the licensee, has an As Low As Reasonably Practicable (ALARP) assessment been conducted in order for the risk to be accepted? NOTE 1: The ALARP assessment must be demonstrable. Note 2: Intent of ALARP assessment is for the licensee to justify the adequacy of risk treatment measures implemented to accept residual risk.

1.2 Risk Management

a) Are preventative control measures effective? Check incident records, near misses, physical integrity assessments (including safety critical equipment such as overpressure protection), management system implementation and auditing (see management system auditing). If critical preventative risk control measures are procedural (e.g. critical operating procedures) the licensee should be requested to explain how the effectiveness of procedural measures is monitored.

b) Are mitigative risk control measures, implemented to prevent escalation of an incident and/or essential to reducing risk level to ALARP effective? Examples of such measures include gas detection alarms,

DMITRE Fitness-for-Purpose Assessment Guideline 5

vessel isolation and blowdown, and emergency response procedures. What validation techniques has the licensee utilised to ensure that these measures are effective and what were the results of validation processes? Examples of validation techniques include inspection/testing of equipment and results, third party verification of adequate system design, regular emergency response drills.

c) Note the number and type of independent barriers implemented to prevent serious incidents, including MAEs.

1.3 Are major risks (high consequence) communicated to employees, contractors and visitors (induction, training modules, etc)? If so, how is this facilitated?

2. Personal Safety

2.1 Job Hazard Analysis (JHA) Are specific JHAs undertaken for the particular task or are generic issued? Are JHAs subject to auditing?

2.2 Permit to work (PTW) system implemented, reviewed and audited? When is a permit required?

2.3 Is there a Significant Hazard Risk Register (SHRR) or similar? Is the SHRR regularly reviewed and updated if necessary? Is a controlled and up to date version of the SHRR readily available to staff?

Physical Integrity Assessment

3. Are facilities/vessels maintained in accordance with integrity management plans (or similar)?

4. What has been considered in the formation of integrity management plans? For example, is the integrity management plan based on risk, a particular industry standard or Original Equipment

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Manufacturer (OEM) specifications?

5. Are integrity management plans regularly reviewed? Are integrity management plans based on any critical assumptions? If so, are regular reviews required and conducted to validate the effectiveness of integrity management and assumptions?

6. Are integrity management plans effective in mitigating identified integrity threats? Have inspections and tests, as required under the integrity management plan, been undertaken? What were the results of inspections and tests, undertaken in accordance with integrity management plan, used to support the FFP conclusion? Have any integrity issues been identified? If so, how are these going to be rectified and what assurance has been provided for similar integrity problems not to occur on similar equipment.

7. Have critical operating parameters been identified? How are they monitored? Have there been any excursions outside of the operating envelope over the past 5 years? If so, have the consequences of any excursions been adequately assessed? How will future excursions be prevented?

8. Pipelines/flowlines specific:

8.1 Has an in line inspection (ILI) been carried out on the pipeline? If not, why not? The licensee should demonstrate that the risks to the integrity of the pipeline are being managed to an acceptable level to justify why an ILI is not required.

Management System Effectiveness

9. Has the Management System been documented?

DMITRE Fitness-for-Purpose Assessment Guideline 7

10. Management System implementation:

10.1 Compliance Audits (audits undertaken to ascertain whether activities have been conducted with the documented systems).

a) Have audits been conducted to confirm that activities are being undertaken in accordance with the documented management system, including the procedures and work instructions?

b) What is the frequency of audits? What is the rationale for auditing frequency?

c) What is the scope of the audits? What is the rationale for scope? Are all pertinent areas eventually covered?

d) Are the audits undertaken by a person independent to relevant area and/or third party?

e) What were the results of the audits? Did the licensee act to resolve the underlying root causes of non-compliances? An example of an underlying root cause is inadequate supervision of people undertaking an activity.

f) Were the remedial actions recorded, assigned, risk ranked, and closed out?

g) Pipelines/flowlines specific

o Have any Pipeline Management System audits been undertaken?

o Have there been any audits conducted against the requirements of AS2885?

h) Have any audits been conducted to assess compliance with Statement of Environmental Objectives (SEO)? What were the results of these audits, have any issues been identified?

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11. Effectiveness

11.1 Results of compliance audits?

11.2 Are the objectives of the management system defined? Do the objectives of the management system align with the SEO and other regulatory objectives?

11.3 Are management systems achieving their objectives, for example:

o No/minimal incidents (check DMITRE inspections records in addition to incident reports).

o Equipment is well maintained according to inspection results.

o Elimination/reduction of the frequency and severity of loss of containment events.

o Increasing plant availability and reducing unplanned maintenance – see item 11.6

11.4 Consider following, 'key' management system components (use self- assessment tool1 for additional guidance on management system assessment):

a) Emergency Response o Is there a documented emergency

response plan/procedure? o Are emergency response drills

conducted regularly? o Is the licensee liaising (not applicable

to all licences) with the relevant emergency services to ensure that emergency response will be effective if required?

b) Asset Integrity Management System o See “Physical Assessment” above.

c) Contractor Management o What is the pre-qualification process

for contractors?

1 Available on DMITRE website Go to Mineral and Energy Resources, Petroleum, Legislation & Compliance, Activity Approval Process,.HSE Management Systems.

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o How is contractor performance monitored?

o How are the contractor’s systems bridged with the licensee’s to achieve the licensee’s objectives (including the objectives of the SEO)?

d) Management of Change o Is there a documented, auditable

management of change system that assesses risk associated with change and ensures all implications of any change made to the facility, documentation, legislation, etc are assessed and managed?

e) Training and Competency o How are staff competencies identified,

recorded, monitored and reviewed? o Do employees have individual training

plans which are reviewed and up to date?

o Effective induction for employees, contractors and visitors.

f) Communication and Supervision o Is there effective communication and

supervision of employees, contractors, and visitors to ensure the objectives of the management system and the SEO are achieved?

g) Action Tracking System o How are actions recorded, monitored,

risk assessed and closed out?

h) Incident Investigation and Reporting o Do incident investigations involve root

cause analysis? o Are near misses being recorded,

investigated and closed out?

i) Document Control and Records Management Systems. o Is there a clearly defined and

documented records management system?

o Are critical documents and records

DMITRE Fitness-for-Purpose Assessment Guideline 10

easily accessible to staff and appropriately controlled?

o How are critical documents, such as Pipeline and Instrumentation Diagrams (P&IDs), controlled, reviewed and updated to ensure up to date documents can be easily accessed?

o Possible overlap with management of change.

j) Organisational Responsibilities o Are responsibilities and

accountabilities clearly defined and documented at all levels within the organisation?

11.5 Have audits been undertaken to ascertain whether the management system is achieving the desired objectives (i.e. is the management system effective)? Have any audits been undertaken to assess compliance against relevant industry standards (e.g. AS4801)? What were the outcomes of such audits and how have the recommendations been addressed?

11.6 Processes other than auditing used to monitor management system effectiveness; for example: o Licensee’s self-assessment results o Monitoring and review of Key

Performance Indicators (KPIs) such as (examples only):

o Percentage of scheduled maintenance completed within nominated period

o Percentage of action items overdue compared to overall list of action items

o Percentage of time plant is in production with safety critical items (e.g. pressure vessels) in a failed state as a results of inspection or breakdown vs. total production time

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Step 3

Before finalising the request for additional information from the licensee, DMITRE is to consider the following:

o Previous FFP reports for the facility within the licence(s). If no previous FFP reports are available for the particular facility, consider FFP reports for similar facilities to help identify key threats and risk management strategies.

o Other relevant reports (as required), including: o Licensee’s Annual Compliance Reports prepared under Regulation 33

of the Act.

o Environmental Impact Reports (EIR) prepared under Regulation 10 of the Act.

o Statement of Environmental Objectives (SEO) prepared under Regulation 12 of the Act.

o Emergency response drill reports submitted in accordance with Regulation 31 of the Act.

o Incident reports submitted in accordance with Regulation 32 of the Act. o Any risk assessment reports previously submitted to DMITRE. o Activity Notifications submitted in accordance with Regulations 18 or 19

of the Act.

o Quarterly compliance meetings for: o Audit schedules. o Key integrity issues.

o Past Health, Safety and Environment Management System self-assessment tool results submitted by the licensee and components of the management system previously subjected to validation processes undertaken by DMITRE to ensure:

o Information pertinent to a component of the management system recently reviewed in detail is not requested.

o Any components of a management system previously identified as requiring improvement have been addressed in the FFP report.

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ATTACHMENT 1 - FITNESS FOR PURPOSE REPORT CHECKLIST Regulation 30 — Fitness for purpose assessments

Company Licence Date received

 Regulation Comments

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30.(3) An assessment under this regulation must specifically address - (a) the physical condition of

each facility; and

(b) the effectiveness of management systems for the operation and maintenance of each facility; and

(c) The potential for the environment to affect the safe and effective operation of each facility,

(d) The potential for serious incidents to occur at each facility, including potential for hazardous materials at or near to affect operation,

(e) The adequacy and reliability of utilities required to enable effective operation at each facility (so far as this may be relevant).

30.(4) For the purposes of section 86A(2) of the Act, the following intervals are prescribed:

(a) the first assessment must be carried out within.

(i) in the case of a report that relates to a production facility or pipeline within 5 years after commissioning; or

(ii) in any other case within 5 years after the completion of a statement of environmental objectives under the Act, or an environmental impact statement or public environmental report under the Development Act 1993 (as the case may be); and

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Regulation Comments

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(b) each subsequent assessment must be carried out within 5 years after the completion of the previous assessment.

30.(5) For the purposes of section 86A(4), a report must be furnished to the Minister within 2 months after the completion of the assessment. Administrative penalty.

30.(6) A report under Regulation 30.(5) must include, in relation to each facility to which the report relates: (a) A name and description of

the facility,

(b) The date on which the assessment occurred, or was completed,

(c) A summary of the assessment of the risks associated with the operation of the facility,

(d) A statement of the state of the current and expected (over an ensuing 5 year period) fitness-for-purpose of the facility, setting out the grounds on which the statement is made and including:

(d)(i) An assessment of the physical condition of the facility.

(d)(ii) An assessment of the effectiveness of the management systems for the operation and management of the facility,

(d)(iii)

Information on any other factor that may adversely affect or compromise the fitness-for-purpose of the facility, such as those mentioned in Regulation 30.(3):

30.(8) Information provided in the report must: (a) Be balanced, objective and

concise,

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Regulation Comments

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(b) State any limitations that apply, or should apply, to the use of the information,

(c) Identify any matter in relation to which there is a significant lack of relevant information or a significant degree of uncertainty,

(d) So far as is relevant, identify the sensitivity to change of any assumption that has been made and any significant risks that may arise if an assumption is later found to be incorrect,

(e) So far as is reasonably practicable, be presented in a way that allows a person assessing the information to understand how conclusions have been reached.

8(a) A report under this regulation.

(a) must be provided by the licensee or a person specifically authorised to provide the report for the purposes of this regulation; and

(b) must contain a declaration signed or executed by the person providing the report that he or she has taken reasonable steps to review the report in order to ensure the accuracy of the information contained in the report.

30.(9) A licensee must promptly carry out any remedial action that is necessary or appropriate in view of a report under Regulation 30, and must ensure that any identified risks are eliminated or reduced so far as is reasonably practicable.