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A.Aleshin's interview to INTERFAX

Rostechnadzor Chairman: Russian safety technologies are comparable with the world’s best ones while staff’s misconduct is hugely worse

Alexey Aleshin speaks about the forthcoming inspection of the oil pipelines and comments on the lower accident rate in the production facilities.

Moscow. February 8. INTERFAX.RU – Rostechnadzor mainstreams smart safety systems in the facilities, but warns of the human factor challenge. The Service’s chairman Alexey Aleshin speaks with Interfax about the measure taken to reduce the accident rate and the associated problems, the state of the oil and gas complex and unveils preliminary results of the Service’s works in 2016 and prospects for 2017.

- There’s a lot of talk going on about the risk-informed approach in the supervisory practices. How is it being implanted at Rostechnadzor?

- First I would like to clarify what a remote monitoring system is, the system we are currently introducing. It’s a system created by Russian Telecom Equipment Company on its own initiative, without using any budgetary funds.

The application is connected to the automated process control system which is available in all facilities of Hazard Classes 1 and 2. Speaking in simpler terms, it is based on the traffic light principle. Green light is when everything’s all right, yellow light means some noteworthy changes are taking place, and red light means that no accident has happened although its risk is extremely high and urgent action must be taken.

Unlike the automated process control system, our application works one step ahead analyzing accident risk. In this way, we are allowed some time to rescue the people and ultimately prevent an adverse course of events, save the equipment, and the production process in general.

Lukoil was the first to introduce this system at its off-shore platform MLSP-1. Last year we demonstrated the system to Chairman of the Government Dmitri Medvedev and it was met with approval. I think these systems must be there, at least, in the facilities of Hazard Classes 1 and 2. The companies themselves are interested in having this application. We are not forcing anyone to have it.

Following the major accident at the Severnaya coal mine, Dmitri Medvedev at the meeting in Novokuznetsk charged the industry with studying the issue of implementation of such systems at the coal mines. SUEK and we are working on it at the moment. The systems has been working in test mode in a number of facilities and showed some good results. Also, jointly with Gazprom and Lukoil, we are piloting the system at oil refineries and pipelines.

- How long are planning to have this system in test mode?

- It’s premature to speak about concrete terms because it takes time to work out the relevant algorithms. Each specific hazardous production facility will have its own algorithm based on generic software solutions. This system won’t take any heavy expenses from the owners.

- What is your view on industrial safety in 2016? Can we draw any interim conclusions?

- Now I can say for sure that the accident rate in 2016 in the hazardous production facilities significantly dropped as compared with the previous year. Speaking about industrial safety in the HPFs, the reduction was 13 percent. Is it much or little? I believe the result is, let’s say, not bad. The figures are the lowest in the recent Russian history.

The most important point is the number of fatalities. Regretfully, 186 people died in the hazardous production facilities in 2016. The Severnaya accident alone claimed the lives of 36 people. But I ought to note the number of fatalities dropped last year (7 people less than in 2015).

- What is the cause of most of the accidents?

- In my opinion, human factor is always the cause. Firstly, insufficiently qualified engineers and technicians, or also deliberate disregard of the existing rules. As a result, the process is organized in a way when the most important standards are breached, which leads to sad consequences. Secondly, this is what they call personal misconduct when people are aware of how it must be done but deliberately break the rules in a Russian hit-or-miss fashion.

Last year we undertook the analysis of the state of industrial safety and compared it with the world’s best practices. We came up with an interesting picture: the technical and technological conditions employed at the Russian coal mines were almost 100 percent compatible with the best international practices, but the index of personal occupational misconduct was approximately twice as worse than in other countries, while the unsatisfactory process flows was 20 times as worse. We must work harder in this direction.

- What exactly has to be done?

- Unconditionally, first of all, it’s rule making. Rostechandzor issues regulatory acts with the requirements and rules of process organization in the hazardous production facilities that help preclude accidents. The federal codes and rules in the field of industrial safety are written, as the saying goes, in blood. Investigating the accidents, we reveal gaps in the regulatory control and try to fill them in promptly enough.

The other area is related to introduction of new codes and methods of implementation of control and supervisory activities. This refers to remote supervision I spoke about earlier. In addition, we want to make recurrent violations of industrial safety a criminal offense as they threaten the lives and health of the workers no matter if negative consequences have taken place. The regulatory document is currently under approval. After the process is completed, we will submit the bill to the government so that the Cabinet comes forward with the initiative at the State Duma. I really hope that our initiative finds support.

- In view of the oil price movements and bigger tax burden, we see a dropping refining margin of the Russian oil refineries. Are the investments in re-equipment of the oil refineries and their safety going down, respectively? Do you think there is a risk that leads to the companies’ inability to fully comply with the conditions of the quadripartite agreements in 2017 and in 2018?

- When the margin goes down, it is natural that the companies try to save money. As far as we are informed, there was a slight increase in the number of accidents in 2015, but I should note their scale was smaller. When we started to figure out the causes, we found out the companies started to economize on repair. The Rostechnadzor specialists paid attention to it and reversed the trend in 2016. No matter if the margin goes down, no matter if they have funds, there are binding industrial safety requirements that must be complied with.

Speaking about the quadripartite agreements, I need to mention that the small companies are facing the biggest problems. At first they were very loud declaring their participation in the agreements when the price of oil was $100 and higher. In the current situation, they will have a hard time meeting their commitments.

Under the quadripartite agreements, the companies will have to build and reconstruct 127 re-refinery units, including 93 shallow raw material processing units with processes improving the quality of motor fuel and 34 deep oil refinery units.

As of January 20th, 60 re-refinery units were built and reconstructed. Alliance Group (NNK) and the Antipinsk Refinery have fully fulfilled their commitments under the quadripartite agreements, although we know for sure they are carrying a sufficiently serious loan debt burden.

Some larger companies have failed to timely fulfill their construction and reconstruction plans for 2014 to 2016 and postponed the time of commissioning of the facilities. But they don’t refuse to construct them. We need to understand that construction of any unit is not an instantaneous decision and billions of investments. It’s easier to complete a unit and profit from it rather than to spend a half of the amount and reject it completely. The agreement is valid until 2022, therefore the companies still have some time to meet their commitments.

- Commissioned by Vice Prime Minister Arkady Dvorkovich, Rostechnadzor is undertaking unscheduled inspections of the oil refineries and depots that export non-marketable fuel oil. How successful are these inspections? Are we talking about struggle against infringement products? If yes, was the situation in the market that critical?

- I will say right away that the issue of infringement products is out of our scope. We first of all monitor the compliance with the industrial safety rules. As of January 24th, Rostechnadzor completed 10 out of 59 scheduled inspections. We inspected Nayada, the Yaroslavl Refinery, Afipsky Refinery, Krasnodar Refinary-KEN, Ilsky Refinery, RN-Tuapse Refinery, NefteKhimServis, Slavyansk Eco, South Industrial Company and Firma Temp which produce and export dark oil products.

We detected 716 violations of the industrial safety requirements, issued orders to rectify them and applied administrative action against the persons who committed violations of the industrial safety requirements. The total amount of penalties is over 4 million rubles.

The Rostechnadzor specialists established that none of the inspected refineries had a technology and equipment to produce light oil products in line with the technical regulations of the Customs Union. All the refineries had a low oil conversion ratio between 41 and 55 percent. It’s a sign of the lack of re-refinery processes. The facilities mainly produce raw gasoline, diesel fractions, marine fuel and furnace fuel oil.

The Yaroslavl Refinery had no documents to confirm the compliance of the marketable products with the requirements of the technical regulations. All the other organizations inspected confirmed their output of fuel oil with completed declarations. The inspections will last until November 2017 at least, or may be longer.

As for the reason for the inspections, it’s composite. First Rosstandart raised the question of infringement products and the other instructions followed. Then there were those organizations which supplied fuel but didn’t produce it. And the question was what exactly they supplied.

Rostechnadzor created a base for the so-called mini-refineries with 293 facilities in it. We shared the base with the tax office, Rosstandart and Federal Customs Service. And we found out a surprising thing – let’s say a facility with an annual capacity of up to 200 thousand tonnes of oil suddenly moves 100 thousand tonnes abroad with its certificates.

As you understand, if you have a three-litre vessel, it cannot contain five litres. That paradox was the reason for different instructions, and they selected the companies which, as far as the Ministry of Energy and Federal Customs Service were concerned, shifted different amounts of dark petroleum products across the border and did not produce marketable gasoline and marketable products for the domestic market. And the government decided to find out what kind of companies they were and how they made their living.

Today we see a horrible picture in the facilities – they are not equipped even with the primary technical things, needless to mention means of accident protection and prevention. That is why we suspended the operation of the Yaroslavl Refinery, are inspecting in St. Petersburg and its region to find just the same. The list also included a few tank farms which in their documents describe themselves as fuel producers. It means a banal oil depot under the guise of storage either does compounding or has illegal installations. We try to find out what is actually going on.

We have no problems with the large facilities, they are often inspected and some of them are attended by our inspector under the permanent supervision regime. The problem is mostly with small and medium facilities with a processing capacity of less than 1 million tonnes but more than 100 thousand.

- There is information that Surgutheftegaz’s Kirishsky Refinery faces problems – they made mistakes when they installed equipment as part of their upgrade programme.

- The problem of the quality of supplied equipment, insufficiently qualified staff of the installation companies definitely affects the pace of re-equipment of the industry in general, and the Kirishsky Refinery is no exclusion. However, hazardous production facilities are commissioned only after all the comments made by the specialists of the customer and Rostechnadzor are rectified. The owner is not interested in having poor equipment, it means loss of billions.

In 2016, after all the comments were rectified, Rostechnadzor issued conclusions of compliance for all the constructed facilities. The facilities are now under normal operation.

- There was information that the government supported the construction project of the Makhachkala Refinery. Previously Rostechnadzor had comments when the refinery was under construction. Have all the violation been remedied? Is your agency ready to issue approvals for operation of the refinery?

- All the violations earlier detected by Rostechnadzor during the inspection at the Makhachkala Refinery were fully remedied. The construction has been completed by now. On December 29th last year, the Caucasian Department of Rostechnadzor issued the conclusion of compliance to the owner. Now they will get their operating license.

Previously we did have a lot of questions to the Makhachkala Refinery beginning with the fact that it was built in just one month, in any case as the documents submitted to us said. At the initial stage Rostechnadzor revealed 275 violations, and very serious ones. The tough situation lasted almost 30 months when we strived to have all the requirements in line with the law. And we made it.

- Does Rostechnadzor have any comments on the Kharyaga Production Sharing Agreement? Particularly bearing in mind that there’s still no sulphur conversion unit for recovery of oil-associated gas there.

- The issue of recovery of oil-associated gas must be settled after the central production facility is completed. At the moment they are behind the schedule. The construction of the oil-associated gas recovery system should be resumed in 2018, and in 2019 it should be commissioned. As part of the state construction supervision implemented by our service we constantly monitor the situation. I remind that the companies have their own schedule and they are overcoming the delay. That’s why I hope this problem will be solved.

- Rostechnadzor recently completed a large-scale scheduled inspection of Bashneft and its subsidiaries. What are the results?

- We checked processing and production separately, these are two different inspections. One of them was over on December 26th last year, and the other on January 13th earlier this year. If we talk about processing, we eventually found 1610 violations. As a result, we wrote two reports on the juridical person and 25 on officials. Besides, Rostechnadzor went to court to have four officials disqualified.

- What is the outcome of the investigation of the accident at Bashneft’s Ufaneftekhim? What is the amount of damage?

- The investigation of the causes of the Ufaneftekhim accident goes on, and it’s premature to speak about the amount of damage in this case. A big accident is always a set of causes. I can say absolutely clearly that it’s a multiple-factor accident – we have the human factor, we have human errors, and we realize the expert company is to blame too. Now we are assessing how significant the role of the expert organization was in the accident. They did the reviews in the facility and came up with a positive conclusion for that part saying it could operate for more than four years although its lifetime is over 20 years. We need to have conclusions from all the experts involved in the investigation, who must examine the metal, reconstruct the events and so on. I think we will finish the investigation of the accident causes by mid-February and then send the papers to the Investigative Committee.

- Could you share the outcome of your investigation of the accidents at Shop 1 of the deep heavy still bottoms processing unit of TAIF-NK refinery complex where they did precommissioning?

- The investigation of the accident is not over yet. An incident in a facility under construction cannot be an accident in a hazardous production facility as it is not already commissioned. At present we understand that the accident was triggered by the equipment manufacturer. The owner will assess the damage, but we see that each idle month for such an installation is a serious thing because it could have earned profit to the company.

- The commissioning of the installation was scheduled in the fourth quarter of 2016. What will be the impact of the accident on the commissioning schedule?

- Given all circumstances, they won’t ask us for the conclusion of compliance before summer. It’s high-capacity equipment, the installations are complex technologically, something has to be proven, additionally designed, delivered and installed. It’s natural that the company is not geared up for faster work because if anything else happens they will suffer serious losses.

- In early 2016, the Ministry of Natural Resources announces the plans of Rosprirodnadzor (Federal Supervisory Natural Resources Management Service) and Rostechnadzor joint inspections of the oil pipelines, but it has never begun. Is everything ready for the inspection and when can it be started? Is there a schedule of inspections, a list of facilities? What prevented you from starting it earlier?

- Charged by the fuel and energy complex governmental commission, Rostechnadzor started to inspect the companies operating flowlines as early as in 2014. In 2016, under the same instruction, Rostechnadzor inspected 810 hazardous production facilities of oil and gas production and eventually revealed 4 353 violations. Thirty-five juridical persons and 185 officials were held administratively liable. The total amount of penalties was 12 million 650 thousand rubles. There aren’t any joint inspection teams of Rostechnadzor and any other agencies. The public prosecutor’s office makes sure that all the inspections are performed at the same time.

- Russia has started to fulfill the agreement to cut oil production as it was finalized with the OPEC and non-OPEC countries. The oil companies stated that the output could be reduced by shutting marginal wells. Is Rostechnadzor involved in monitoring of the technical condition and safety of the wells that are now temporarily out of operation?

- Beyond all question. We keep an eye on the condition of the suspended wells. The users establish the frequency of inspections as agreed upon with our territorial department, but as often as once in a quarter. Results of the inspections are captured in a special logbook, therefore we certainly take care of it.

- December 31st, 2016, was the day when the construction permit for the Tikhoretsk-Tuapse-2 oil pipeline expired. Has it been repaired? Is Rostechnadzor planning to inspect the facility, or maybe it has already been done? Is there a ground to issue the conclusion of compliance?

- As far as Rostechnadzor was informed by the developer, the pipeline construction permit was extended until late 2018. The collapsed part of the oil pipeline has been fully restored.

In 2016, our territorial department performed two inspections, detected about 30 violations and took the needed measures – wrote reports and orders, held the juridical person and officials administratively liable.

We are supposed to modify our 2017 inspection programme because of the changes in the construction schedule and the time of completion of the work to be inspected. The conclusions of compliance will be issued when the facility is fully in place.

- Have the Rostechnadzor comments on Gazprom’s Bovanenkovo-Ukhta gas pipeline been rectified? They had a problem getting their conclusions of compliance.

- Our supervision of the construction of the major construction facilities of the Bovanenkovo-Ukhta main gas lines of the first string is now over. We have issued conclusions of compliance for its 30 facilities. All physical defects and documentation-related shortcomings were completely rectified last year.

- Is there a risk of repeating the situation with the conclusions of compliance when the Power of Siberia is commissioned?

- Rostechnadzor is exercising construction supervision as the Power of Siberia gas line is constructed. There are 10 major construction facilities under supervision. We perform our construction supervision as normal, but now we have no reason to say that something unconventional is going on there.