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Analysis: Towards a secure O&G pipeline infrastructure

Analysis: Towards a secure O&G pipeline infrastructure

Pipelines will criss-cross the country on an accelerated basis over the next five years. Will they be confronted with land acquisition-like problems? Deepak Mahurkar writes why the amended P&MP Bill needs to be implemented to effectively address incidents of protests, sabotage, theft, pilferage and tampering of O&G pipelines.

Pipelines have always been considered as the most economical, safe and eco-friendly mode of trans­p­ortation of crude oil, petroleum products and nat­ural gas. India has invested significantly in the expansion of its pipeline network in the last few years and signifi­cant capacity is expected to be commissioned in the next 4-5 years.

While pipelines represent a great enabler for the oil and gas (O&G) industry, we must not forget the serious challenge of sabotage, theft, pilferage and tampering of oil and gas pipelines that is prevalent across the world. There have been various incidents of this nature. One such major case reported was the problems faced by the Shell Petroleum Development Company (SPDC) in Nigeria. The company is learnt to have continued to face incidents of sabotage and theft to its pipelines from terrorists and anti-social elements for the past many years. In the last few years, the company has reportedly been involved in legal cases with local communities for oil spills from its pipelines. However, according to rep­orts, sabotage and theft are the major causes behind these spills and the estimated losses in 2009 from these incidents were 103,000 bpd from 95 incidents which was 98 per cent of total oil spills that year. Some other major examples of such pipeline security incidents from all over the world have been summarised in Table 1.

The problem is also widespread in India and the same is supported by the following statistics:

  • Over 80 incidents of pilferage from pipelines were reported in Rajasthan during the period between 2006 and 2009. However, the number is suspected to be significantly higher as these represent just the cases that were reported to the police.
  • An Indian exploration and production (E&P) com­pany is learnt to have registered 98 First Information Reports (FIRs) for pilferage attempts from its crude oil pipelines in a single state in 2000-2007.
  • A Fortune 500 Indian Public Sector O&G company also reportedly faced 160 incidents of attempted theft from the company's pipelines in Gujarat and Rajasthan alone during the period between 2001 and 2008. Incidents have also been reported in UP, Bihar, Jharkhand, Haryana and West Bengal. The frequency of such incidents is learnt to have increased significantly from 2001 to 2008. 

These acts of sabotage are a major cause of concern for the pipeline operators as they expose the companies to many possible risks.

The negative impacts and risks associated with pilfe­rage in crude, petroleum products and gas pipelines are:

Loss in revenue: The physical loss of crude oil, gas and petroleum products represents a loss of revenue to the company as well as to the national exchequer.

Disruptions in the downstream value chain: Any act of sabotage on crude/natural gas pipelines can cause supply disruptions to refineries or petrochemical units and the impact can get transferred across the value chain downstream.

Environmental impacts: Leakages in pipelines can impact the arable soil, surrounding environment or eco­logy; contaminate the water sources that are both above and below the ground.

Loss of life and property: Fire or explosion may cause loss of life or property.

Costs of repair: Significant costs are involved in re­pair of damaged pipelines.

The remedial actions

Pipeline operators are forced to adapt a two-pronged strategy in order to counter this serious problem of pilf­erage, which involves:

Use of technology for pilferage detection: The com­panies monitor their pipelines 24×7 through state-of-the-art Supervisory Control and Data Acquisition (SCADA) systems. These systems monitor the volum­etric throughput across the entire pipeline. Any devi­ation beyond a pre-defined limit sends automatic alerts to a central control room. However, the system has its limitation and is able to detect pilferage only in certain specific conditions such as a shutdown. Use of satellite surveillance and technologies such as electro­magnetic detection, infrared laser camera, image multi-spectral sensor (IMSS) are also considered for pilferage detection and prevention across the world.

Security measures around the pipelines: Regular patrolling and inspection by guards with the help of government security forces, including police force, is used to ensure that such attempts are avoided. The villa­gers/land owners are also made aware of the possible con­sequences of such incidents. Once the pipeline company has detected a leakage, the next steps involve invoking the legal system by filing an FIR and following up for the status of investigations.

The Petroleum & Minerals Pipeline Act (Acquisition of Right of User in Land), 1962 (P&MP Act 1962) pro­vides for acquisitions of rights of user in land for laying pipelines for transport of petroleum and minerals and for matters connected therewith. An 18-m wide corridor which is called Right of Way (ROW) is to be acquired by various oil companies under the said Act. The Sections 15 and 16 of the Act lay down the legal pro­visi­ons for cases involving pilferage or sabotage of pipelines.

The P&MP Act and amendments

Despite the provisions in the P&MP Act 1962, the number of such incidents had been rising on a regular basis. In many cases, it was noticed that the terrorists/criminals are using improved technology to cause large scale damages. This implies that these provisions are not an effective deterrent for the criminals committing these pilferages or incidents of sabotage.

The provisions under the Sections 15 and 16 of the Act allow the authorities to arrest or detain any offender only when he caught at the time of committing the crime. Further, the persons caught for committing the crime are prosecuted under Sections 379/380 of the Indian Penal Code (IPC). Many of these cases are ren­dered weak in the court of law due to absence of witnesses. Therefore, it was noticed that the provisions in the act were not strong enough to put off criminals from committing these activities.

A need was therefore felt by various stakeholders in the petroleum industry to make the provisions in the Act more stringent and allowing the enforcement age­ncies to punish the offenders in ways that could deter offenders from such criminal activities.

The Sections 15, 16 and 18 were identified as needed amendment. Many amendments were proposed in the P&MP Act 1962 including the addition of new sub-Sections. The Planning Commission, Department of Expenditure (Ministry of Finance), Ministry of Home Affairs and the Department of Legal Affairs were con­sulted on this matter and they endorsed the proposals for amendment.

Once the cabinet approval was obtained on the proposals, the draft Petroleum and Minerals Pipelines (Acquisition of Rights of Users in Land Amendment) Bill, 2010 was introduced in the Parliament on 16 March 2010 by the Minister of Petroleum and Natural Gas. The Bill was subsequently referred to the Standing Committee on Petroleum and Natural Gas. As of now, the Bill is still pending in parliament. However, many provisions in the Bill intend to make these offences cog­nisable and non-bailable. The punishments for offenders are also proposed to become stricter. Proposed amen­dm­ents and additions are given in Table 2.

The possible impact

It is evident from the amendments proposed in the Bill that this is a more robust legal framework inte­nded to empower the enforcing authorities and the compan­ies to secure the O&G pipeline infrastructure effectively.

The new Bill makes these pilferage/sabotage offences cognisable and non-bailable along with introduction of substantially more stringent punishment provision. These provisions, if implemented, will help deter the cri­minals from committing these crimes.

The Amendment Bill also effectively targets some of the loopholes in the P&MP Act, 1962. The Section 16B is targeted to reduce the instances of an offender going scot-free due to lack of evidences or witnesses. Section 16A will minimise the instances where lack of enforcement authorities leads to a criminal not being punished. The petroleum companies also stand to benefit immensely from the new Bill as it will also ensure that the ownership of the seized petroleum products rests with the pipeline operator.

The Bill definitely represents a positive step in the direction of ensuring that our O&G supply chains are more secure, business continuity is maintained and nega­tive impacts of pilferage/sabotage such as loss of life, env­ironmental contaminations and financial losses to the pipeline operators are minimised.

Some sections of the industry also felt the need to amend the land acquisition procedure of the ROW for a pipeline. At present, the land is acquired by a company through payment of a spe­cified compensation to secure the right of use of this land for laying, operating and mai­ntaining a pipeline. The process is deemed to be very complica­ted and time consuming, and therefore impacts the total completion time of the project and quite often leads to overruns. However, there have been no proposed amen­dments in the Bill that seek to address this issue.

The author is Associate Director – Oil & Gas Practice, PwC India. With inputs from Saurabh Jha, Knowledge Manager (Oil & Gas), PwC India.

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