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Sunday, December 8, 2019

BP seeks $167M from Italian company over equipment failure at Whiting, Ind. refinery

By Jonathan Bilyk | Dec 9, 2014

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BP went to court last week to demand more than $167 million in damages from an Italian company responsible for installing equipment that apparently failed, spilling superheated diesel fuel and shutting down Canadian crude processing operations at Whiting, Ind., refinery for almost two months earlier this year.

On Dec. 1, Naperville-based BP Products North America Inc. filed suit in Chicago's federal court against Officine Luigi Resta S.P.A., a company based in Bergamo, Italy, northeast of Milan.

According to its website, Resta, named after its president and general manger Luigi A. Resta, has since 1950 fabricated equipment, specializing in the manufacture and installation of so-called shell and tube heat exchangers, for oil, fertilizer and petrochemical refiners and processors.

The devices are used to equalize the temperature of distillates being heated under pressure at certain points in the refining process.

BP’s action centers on a Jan. 17, 2014 incident, in which one of eight heat exchangers at the BP Whiting Refinery ruptured. This incident, BP asserts in its complaint, “resulted in the release of more than 4,000 pounds of material” – in this case, “gas oil,” or diesel fuel, heated to between 520-635 degrees Fahrenheit – which had been moving through the heat exchangers at the time.

No injuries were reported as a result of the spill, as BP said “fortunately, the release did not come into contact with an ignition source.”

The eight heat exchangers had been installed by the Resta company as part of BP’s project to renovate its Whiting refinery to receive and refine heavier crude oil from Canada’s so-called tar sands in Alberta.

The renovation effort began in 2004, and BP contracted with Resta in 2007. The heat exchangers installed in the Whiting plant’s “gas oil hydrotreater unit,” or GOHT, were completed and began operation in October 2013, according to the complaint.

BP blames the January spill on “defective design” and “improperly welded” joints by Resta.

In its suit, BP said its analysis of the incident revealed Resta had used substandard gaskets in the heat exchangers, which it asserts Resta knew did not meet the engineering specifications BP had spelled out in its contract, and which Resta should have known would not stand up to the temperature differentials and pressures produced under BP’s normal refining operations.

BP said the welds also were done improperly, resulting in “a series of voids” within joints, combining with the substandard gaskets to produce the rupture and spill.

Once the problems had been identified on the broken heat exchanger, BP said it needed to repair all eight exchangers, replacing the faulty parts, as “another dangerous failure was nearly inevitable and the risk of an accident was unacceptable.”

“Given the high risk of fire or explosion from a leak in a GOHT heat exchanger, BP could not use the defective heat exchangers and simply hope for the best,” the oil and gas giant wrote in its complaint.

To repair the heat exchangers, BP said it had to ship the devices to a repair facility in Tulsa, Okla., at a total repair cost of more than $17 million.

The need for repairs left the Canadian crude processing unit inoperable for 59 days, BP said, leading to at least $150 million in lost profit.

BP said it attempted to work with Resta to repair the units, but claims the Italian company was unresponsive to its repeated efforts, prompting the filing of the lawsuit.

The three count complaint alleges Resta breached express and implied warranties, as well as its contract with BP.

BP is being represented in the action by attorneys John R. Worth, David J. Zott, Jessica L. Staiger and Howard M. Kaplan of Kirkland & Ellis in Chicago.

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