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Irish Independent: FREEMAN : Under-pressure execs could shell out over pipeline case

Irish Independent: FREEMAN : Under-pressure execs could shell out over pipeline case

“The fiasco over Shell’s gas pipeline in Mayo highlights the importance of senior executives communicating with the community.”

Thursday July 14, 2005

FINANCIAL theory teaches that our duty is to maximise shareholders’ returns. In practice, we have many commercial relationships that last longer and run deeper than those with most stockholders.

Shareholders and executives are not the only stakeholders. We need to keep workers, customers and even the public on side.

The fiasco over Shell’s gas pipeline in Mayo highlights the importance of senior executives communicating with the community. People form impressions early and most are slow to adjust.

Much resistance resulted from early PR goofs before Shell acquired Enterprise – who made the original Corrib discovery. Shell’s unfairly acquired environmental image over Brent Spar didn’t help.

You cannot delegate this function to internal or external spin-doctors. They are distrusted by the sharper journalists – who are often sceptical and embittered. Spin-doctors lack the detailed knowledge to answer the trickiest questions.

Shell, as operator, must obey standards ensuring the pipeline is safe. The design and risk analyses should be clearly presented.

The certifying authorities police Shell’s compliance with design, construction and operating standards.

Citizens have understandable concerns. The temptation is to substitute rhetoric for reason. Nobody likes development in their back yard. We are all for progress as long as it doesn’t involve change.

The result is our third-rate infrastructure, which overruns on cost and time. It’s why Dublin Airport is congested and we have no rail link. It’s why the DART must stop running for 20 minutes morning and evening to allow the Belfast Enterprise through. It’s why we suffer the ‘mad’ Red Cow Roundabout and toll congestion. It’s why we suffer poor roads and rail.

Caught between emotional agitators and aloof executives, people look to the media for balance. But a desire to entertain and indulge ideology sometimes sacrifices objectivity for effect.

In The Irish Times last week, Fintan O’Toole exaggerated safety concerns by citing three explosions in distant pipelines without explaining the wide differences between Shell’s Mayo project and those disasters.

Two of three cases cited were third party damage: one from thieves who had deliberately and another by builders who had negligently punctured the lines. The third was the unsurprising failure of a 50-year-old system that had never been properly maintained and should have been condemned decades before. None were relevant to Corrib.

Third World disasters are generally due to local thieves breaking into pipelines; the Niger Delta incident Fintan referred to involved criminal damage and theft of petrol.

Similar thefts of electricity occur routinely in countries like Brazil but do not lead to calls to abolish electricity.

Likewise, the 2004 Belgian gas explosion resulted from negligent builders breaking an underground pipeline. It’s hard to legislate against criminality or incompetence.

A gas pipeline explosion did occur in New Mexico in 2000. That pipeline was laid in 1950 and had operated without proper maintenance for decades. Operator El Paso admitted that the failure occurred at a low point in the pipeline that on inspection displayed significant corrosion.

El Paso further stated that this section of piping could not be accessed by an inline-cleaning device. This meant that freestanding water could not be removed nor an inline inspection conducted.

Modern tools, which Shell uses routinely, would have alerted the operators to the corrosion in the pipeline. Modern pipelines are designed to accept inspection ‘pigs’ which are generally run every two years to monitor the condition of the pipeline.

Fintan also reported that the US Office of Pipeline Safety had recorded 4,280 accidents between 1986 and recently. In fact, these were incident reports, which are mandatory for any incident of gas leakage for any reason, no matter how trivial.

Few of these incidents resulted in an accident and OPS reports include all incidents for 1.4 million miles of pipelines, many built decades ago and poorly maintained.

Put that into perspective. The 4,280 incidents over 19 years annualise to 225 per year, or 0.00016 incidents per mile yearly. These US statistics support the opposite conclusion to Fintan’s argument: they show a high safety level compared to, say, road traffic accidents. Cars sometimes crash, but we don’t ban motoring. We regulate traffic to minimise dangers where practical, trading safety off against practicality. It sounds brutal but makes sense.

Shell has built pipelines in the Amazon jungle, deserts and tundra. They have gone up and down mountains, under seas, through cities. Their safety record – as opposed to reserve calculations – is exemplary.

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