01 August, 2016
Background
The rotor shaft of an 8-1KT-2 turbine broke on a large oil sands plant. This led to the shutdown of the Coker 8-1 off-gas compressor which, in turn, required the plant to shut down the entire coker.
An interim solution was employed, which allowed the Coker to operate temporarily. The arm was then repaired and operated without incident.
MDD was hired to quantify the losses associated with this event.
Key Issues
- Were the claimed expenses accurate of the incident’s impact on the refinery’s productivity?
- Were the costs adequately supported and directly related to the incident?
Situation
To help understand how the broken rotor shaft impacted productivity, MDD undertook a thorough analysis of the refinery’s operations. This included an on-site tour of the facility and an examination of all available documentation. Our experts also relied on their extensive knowledge of the oil and gas industry.
We were able to make recommendations regarding the business interruption reserve and we offered alternative approaches regarding the payout of the claimed amount in an effort to help both the Insured and Insurer reach an agreement.
MDD’s Involvement
Upon completing our analysis, we determined the following:
- The claimed loss was based on shipment shortfall during the repair period; however, it did not consider the build-up of inventory and how that was used to recover lost sales.
- Saved mining and extraction costs were based on a theoretical cost per barrel and not actual costs.
- The price per unit of natural gas that was used to determine the extra natural gas cost was overstated.
- The refinery included increases in natural gas that were not loss related and were therefore not covered.
- Prejudgment interest was included in the claimed amount.
Result
MDD’s findings and conclusions were discussed with the Insured and agreed upon to resolve the claim.
The statements or comments contained within this article are based on the author’s own knowledge and experience and do not necessarily represent those of the firm, other partners, our clients, or other business partners.
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01 August, 2015
