engineering justification paper mappowder nts offtake · 2020-01-06 · a pipeline linking the...

Engineering Justification Paper

Mappowder NTS Offtake

Final Version

Date: December 2019

Classification: Highly Confidential

2

1 Contents 1 Contents................................................................................................................................................. 2

2 Introduction ........................................................................................................................................... 3

3 Equipment Summary .............................................................................................................................. 5

4 Problem Statement .............................................................................................................................. 10

4.1 Narrative Real Life Example of Problem ..................................................................................................... 11 4.2 Spend Boundaries ....................................................................................................................................... 11

5 Probability of Failure ............................................................................................................................ 12

5.1 Probability of Failure Data Assurance ........................................................................................................ 13

6 Consequence of Failure ........................................................................................................................ 16

7 Options Considered .............................................................................................................................. 17

7.1 Replace on Failure ...................................................................................................................................... 18 7.2 Repair on Failure ......................................................................................................................................... 18 7.3 Refurbishment ............................................................................................................................................ 18 7.4 Targeted Component Replacement ........................................................................................................... 18 7.5 Replace the Pressure Reduction and Pre-Heating Systems ....................................................................... 19 7.6 Complete Site Rebuild ................................................................................................................................ 23 7.7 Do Nothing or Deferral to GD3 ................................................................................................................... 23 7.8 Options Technical Summary Table ............................................................................................................. 23 7.9 Options Cost Summary Table ..................................................................................................................... 24

8 Business Case Outline and Discussion ................................................................................................... 24

8.1 Key Business Case Drivers Description ....................................................................................................... 24 8.2 Business Case Summary ............................................................................................................................. 27

9 Preferred Option Scope and Project Plan .............................................................................................. 27

9.1 Preferred option ......................................................................................................................................... 27 9.2 Asset Health Spend Profile ......................................................................................................................... 27 9.3 Investment Risk Discussion ........................................................................................................................ 27

Appendix A - Glossary of Terms ............................................................................................................... 30

Appendix B - References ......................................................................................................................... 31

SGN Trans – 001Mapp-EJP-Dec19

3 December 2019

2 Introduction This project is one element of the Transmission Integrity programme within Southern Network for RIIO GD2. The integrity programme is generally health driven considering the health of transmission assets - offtakes, local transmission system (LTS) pipelines, pressure reduction stations (PRS) and ancillary assets. ‘Health’ includes condition (corrosion, cracking, spalling etc.) and reliability (in-service defects etc.).

In terms of engineering justification, the Authority has proposed the following model to differentiate between ‘major projects’ requiring justification in accordance with Appendix A guidance and ‘asset health’ projects justified in accordance with Appendix B.

Figure 1: Engineering Justification Guidance

Guidance for engineering justification

The engineering justification for the majority of Transmission Integrity projects has been classified as ‘asset health’ and has been drafted in accordance with Appendix B since they are related to one asset class, are of limited discipline, relate solely to refurbishment or replacement of plant and have limited uncertainty. The Engineering Justification for the interventions at Mappowder offtake has been prepared in accordance with Appendix B.

This project is to rebuild both the heating and pressure reduction systems on Mappowder Offtake.

General background Mappowder Offtake is located within the county of Dorset and supplies a total of up to 192,858 customers in the Dorchester, Weymouth and Wareham areas.

The NTS began life around 1965 as a single pipeline and spurs transporting methane from Algeria and imported into Canvey Island to the Leeds area. In 1966, the NTS was extended to a new terminal at Easington, where it is understood the first natural gas was beached. In 1969 the NTS was significantly extended with connections to the Bacton terminal and, to the South West and South Wales between 1969 and 1970. Records indicate that Local Transmission System pipelines (LTS) from Mappowder were commissioned during 1969. Mappowder Offtake was therefore one of the first sources of gas into the South LDZ and is therefore one of the oldest offtakes now at least 50 years old.


4 December 2019

Today, the primary roles of an offtake are as follows:

• Filter the gas to at least 10µm, • Meter the gas volume to meet the requirements of the UNC for custody transfer, • Measure the energy value of the gas (Calorific Value) to meet the requirements of the Gas

(Calculation of thermal energy) Regulations, • Pre-heat the gas prior to pressure reduction to combat the effects of the Joule-Thomson effect, • Control the pressure and volume of gas into the LTS, these systems typically operate in

volumetric mode with pressure overrides to ensure pressures do not exceed the Maximum Operating Pressure within the downstream system.

• Odourise the gas to meet the requirements of the Gas Safety (Management) Regulations and the associated Gas Transporter’s Safety Case.

Filtration, pressure control and pre-heating are typically designed in accordance with the Institution of Gas Engineers and Managers (IGEM) recommendations, IGEM/TD/13, Pressure regulating installations for natural gas, liquefied petroleum gas and liquefied petroleum gas / air.

Site specific background The site consists of one pressure reduction system which is supplied from the National Transmission System (NTS) No 7 feeder at pressures up to 70barG and feeds the Local Transmission System (LTS) at pressures up to 32.4barG, Gas leaves the site via two outlets, P034 to East Morden and P036 to Sturminster Newton. Mappowder is the dominant supply into the LTS in Dorset. A pipeline linking the Dorset system to that for the remainder of the South Local Distribution Zone (LDZ) namely, P058 Wytch Farm to Sopley, is only 8” diameter and therefore provides very limited resilience against failures at Mappowder. Network analysis identifies that, on failure of Mappowder Offtake, customers would start to lose gas supplies at demands over 30% peak day, which could reasonably be foreseen at any time between late September and early May.

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5 December 2019

It is proposed to replace the gas pre-heat and volumetric control systems including the associated electrical and Instrumentation systems pre-emptively, prior to failure and the major loss of supplies that would result. The waterbath heaters (WBH) and associated pressure breakdowns and control systems are in poor condition and the failure of obsolete pilots during RIIO-GD1 has only been able to be resolved by using pilots from Braishfield NTS offtake WBH’s when they were replaced. Similarly, the pressure reduction system and associated control panels are obsolete, and all other units installed in the UK have already been replaced. The frequency of problems with the system has increased over RIIO-GD1 and the spares that SGN has been able to collate are running low. Once this stock is exhausted, we will not be able to resolve the next fault of that type putting customers security of supply at risk.

3 Equipment Summary The equipment at Mappowder starting from the site inlet consists of two pig traps owned by National Grid which are part of the NTS and allow internal inspection of the No 7 feeder pipeline.

After ownership transfers to SGN there are two remotely operable valves that allow the Gas Control Centre (GCC) to isolate the site in the event of an emergency. Gas then passes through one of three filters and onto the metering and flow weighed average Calorific Value (CV) measurement systems.

Next the gas is heated by one of the three WBH’s. These heaters pre-heat the gas prior to pressure reduction to ensure the downstream system is protected from the chilling effect first identified by Joule-Thomson. For natural gas, the chilling effect equates to -0.50C for every 1bar of pressure drop. At Mappowder, that can mean a temperature reduction of up to -190C and an outlet temperature as low as -140C during the winter.

Gas then passes through the volumetric controlled pressure reduction system before leaving the site.

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6 December 2019

Finally, there are a further two pig traps, one each for the pipelines P034 to East Morden and P036 to Sturminster Newton.

The project comprises the component replacement of the following:

• Pre-heating system, • Pressure / volumetric control system, • Associated instrumentation systems for these systems.

It is not intended to intervene on the following assets:

• Filtration system, • Metering systems including gas chromatograph, • Odourisation systems.

While the filters have PSSR faults following inspection under ES/94/15 Pt2 (12 yearly major revalidation, including NDT) they will not be replaced as part of this project. The faults have been assessed under SGN’s procedure SGN/PM/DAM/1 “Management Procedure for Control of Defect Assessment” and determined that they are not serve enough to require immediate replacement and the risk can be managed by further targeted inspections during RIIO-GD2 to ensure that the defects have not increased.

Figure 4: Mappowder Filter B


7 December 2019

Figure 5: Water Bath Heater

Figure 6: Water Bath Heater Cabinet

Commercial Confidentiality


8 December 2019

Figure 7: ERS High Pressure Regulator Control Valve

Figure 8: ERS High Pressure Regulator Control Panel


9 December 2019

As summary of the key equipment is as follows:

Equipment Details Year of Commissioning Filters 1969

Water Bath Heaters 1977

Regulators 1987

Table 1 : Equipment Summary

Global Population SGN has the following numbers of Offtakes and PRS within Scotland and Southern networks (as reported during the 2018/2019 RRP):

Network Offtakes PRS Southern 12 157

Scotland 18 131

Table 2: No of Offtakes and PRS by Network

Pre-heating system

The majority of these sites have gas pre-heating systems as follows:

Southern Scotland Offtakes PRS Offtakes PRS

Boilers / heat exchangers 6 133 6 44

Water-bath heaters 6 19 10 61

Electrical element - 3 - 4

Table 3: Types of Pre-heating systems by Network

Water-bath heaters on offtakes are similar in size and construction to those at Mappowder. Water-bath heaters on PRS are smaller and simpler in nature, installed where power supplies for other types of heating systems are not available or weak.

Of the six large water-bath heater systems on offtakes in Southern, one at Farningham will be replaced by the end of GD1, three, Winkfield South, Winkfield South East and Mappowder are planned for replacement in GD2. One system will remain at Shorne offtake, which is a site with low criticality.

Volumetric Control System Volumetric control systems typically exist only on offtakes. A number of small offtakes in Scotland feed small isolated networks and are therefore pressure controlled, as are the population of PRS. Control valves are used for volumetric control as they facilitate ‘set point control’ (SPC) and ‘direct valve control’ (DVC) as directed by the Gas Control Centre to maintain steady flowrates

Control Southern Scotland Volumetric control 11 5

Pressure control 1 13

Table 4: Offtake Control System by Network

There are currently seven systems utilising ERS valves in Scotland and one in Southern. One of the systems in Scotland is being replaced during GD1. The single system in Southern is installed at Mappowder offtake.



10 December 2019

The ERS valves was a unique design developed by the now defunct British Gas Engineering Research Station. It was adopted by Mokveld, but is dissimilar to other Mokveld Control valve designs, which are used in eight systems in Southern network.

4 Problem Statement Preheating for the pressure reduction process is currently provided by three obsolete water bath heaters. The water bath heaters like many others have required repairs for several reasons, including weld failures on the fire tubes. Weld failures lead to a major leak of water and anti-freeze solution on site as well as the loss of the availability of gas pre-heating. Water bath heaters operate with a typical energy efficiency between 50% to 60% so replacement of this system will also deliver a reduction in cost incurred through both routine and non-routine maintenance, greater energy efficiency and a reduction in environmental impact.

The water bath heaters have been classified as HI4 (material deterioration intervention requires consideration).

The now obsolete gas regulators and water bath heaters along with associated control equipment have been in service for over 50 years and have reached the end of their operational life in terms of reliability and the availability of replacement parts, while obsolescence is not a driver of failure it could cause significant supply issues should in-service failure occur as replacement parts are not readily available. The network would start losing customers at demand levels above 30% of peak day without Mappowder NTS offtake operational.

Figure 9: The three water bath heaters at Mappowder

Impact of “do nothing” approach Failure to deliver the intervention to replace the pre-heating system will leave the existing system at a real risk of failure. The pre-heating system negates the loss of gas temperature during pressure reduction, a phenomenon known as the Joule-Thomson effect. A pressure reduction of up to 55bar will result in the loss in temperature of around 190C. Gas enters the site at temperatures down to around 50C meaning that gas could leave the site at -140C, far below the acceptable operating temperatures for high pressure steel pipelines. The consequences include pipeline rupture, ignition and death, loss of supply of up to 138,786 customers or frost heave along the pipeline route, across roads and other transport infrastructure.


11 December 2019

Failure to deliver the intervention to replace the slam-shut overpressure cut-off devices will leave the downstream system at a real risk of over-pressurisation. The downstream system has a Safe Operating Limit (SOL), as defined by PSSR 2000 and IGEM/TD/13, of 35.64barg. This would be greatly exceeded by an inlet pressure of up to 70barg. The consequences include pipeline rupture, ignition and death, and loss of supply of up to 138,786 customers.

Failure to deliver the intervention to replace the volumetric control system will reduce the ability of the Gas Control Centre to control flow-rates and would lead to possible over-pressurisations bringing an increased reliance on the slam-shut valves. Assuming the slam-shut valves are replaced, the outcome would be a potential loss of supply of up to 138,786 customers.

4.1 Narrative Real Life Example of Problem There is corrosion on the volumetric control system pipework, control valves and associated control cabinets which is illustrated in Figure 7 & Figure 8. The regulator housing is cracked/worn and no longer provides suitable acoustic and weather protection.

The main reliability issues with the Engineering Research Station (ERS) high pressure regulators have been due to the positioner and control system. This positioner and some of the associated pilots are contained within a single machined block that sits on top of the valve itself. This can be seen in Figure 7. When problems occur, the stream must be isolated, and the machined block removed from the valve to be worked on. The availability of spares is extremely limited as the valves are no longer supported by the manufacturer.

There have been previous repairs to the fire tubes on the water bath heaters because of weld failure and repeated issues with corrosion on the exhaust flue. Additionally, there is corrosion on the water bath heaters and associated control panels as illustrated in Figure 5 & Figure 6. Failures of obsolete Fisher 124 pilots in the control panels were resolved by using equipment recovered from WBH’s removed at Braishfield offtake during RIIO-GD1. It has been SGN’s experience that once the rate of failures starts to rise it is a signal that the water bath heater is reaching the end of its life.

4.2 Spend Boundaries The project will replace the existing water bath heaters and pressure reduction system at Mappowder NTS offtake. Exactly how this will be achieved will be determined during the detailed design phase of the project, but it is anticipated that this will entail modifications to the site pipework, a new pressure reduction skid, a new fuel gas supply to a new preheating system and modifications to the electrical and instrumentation systems on site associated with the replaced equipment. It should be noted that there is a project within the E&I submission for Mappowder which will undertake a full rebuild of the electrical and instrumentation systems on site and the price developed for this project is based on that work also being funded. If that is not the case further E&I expenditure will be required as part of this project to replace key E&I equipment that cannot support the new mechanical equipment. The existing filters will not be replaced as part of this project but will be subject to further inspection of existing defects during RIIO-GD2.


12 December 2019

5 Probability of Failure The failure rate and deterioration applied to calculate the CBA is consistent with the NARMs methodology. The key principle adopted in the methodology to facilitate the assessment of risk are:

• Asset health equates to the probability that the asset fails to fulfil its intended purpose and thus gives rise to consequence for the network.

• The consequences can be assessed in monetary terms • The risk is determined from the product of the number of failures and the consequence of those

failures

Figure 10: Outline of NARM's Model

Failure rate In the NARM framework ‘failure rate’ is used to calculate the Probability of Failure. The failure rate gives the rate of occurrence (frequency) of failures at a given point in time and may also include an age/time variable, known as asset deterioration, which estimates how this rate changes over time. The failure rate can be approximated by fitting various parametric models to observed data to predict failures now and in the future. Therefore, data that contributes towards monetised risk value has been thoroughly reviewed for each system under this investment.

Failure modes In the NARMs methodology the failures are categorised into different Failure Modes. Below is list of all failure modes considered in the methodology and the resulting failure rates from the model, grouped by system.

Pressure Control • Release of Gas - relating to the failure of a pressure containing component on site leading to an

unconstrained release of gas within and possibly off the site • High Outlet Pressure - failure of the Pressure Control system to control the pressure at least to

within the Safe Operating Limit of the downstream system. This would typically require the concurrent failure of both regulators and the slamshut (failure to operate) within one Pressure Control stream.

• Low Outlet Pressure - relates to the failure of the Filter and Pressure Control system to supply gas at adequate pressure leading to partial or total loss of downstream supplies

• Capacity - where the system has insufficient capacity to meet a forecast 1:20 peak day downstream demand

• General failure - relating to other failures not leading to either a safety, environmental or gas supply related consequence.


13 December 2019

Failure Mode 2021 2022 2023 2024 2025 2026

High Outlet Pressure 0.17 0.17 0.18 0.20 0.23 0.25

Low Outlet Pressure 0.01 0.01 0.01 0.01 0.01 0.01

Release of Gas 0.03 0.03 0.03 0.03 0.04 0.04

General failure 0.08 0.08 0.09 0.10 0.11 0.13 Table 5: Failure Rate – Pressure Control

Preheating • Release of Gas - relating to the failure of a pressure containing component on site leading to an

unconstrained release of gas within and possibly off the site • High Outlet Temperature - relating to the failure of the preheating system to provide the

correct heat input for that associated site gas flow rate resulting in high outlet temperatures • Low Outlet Pressure - relates to the failure of the preheating system to provide the correct heat

input for that associated site gas flow rate resulting in low outlet temperatures • Capacity - where the system has insufficient capacity to meet a forecast 1:20 peak day

downstream demand • General failure - relates to other failures not leading to release of gas, low/high outlet

temperature or capacity failures.

Failure Mode 2021 2022 2023 2024 2025 2026

Release of Gas 0.03 0.04 0.05 0.05 0.06 0.07

General Failure 0.70 0.82 0.96 1.12 1.32 1.55

High Outlet Temp 0.01 0.01 0.01 0.01 0.01 0.01

Low Outlet Temp 0.98 1.15 1.35 1.59 1.86 2.18

Table 6: Failure Rate – Preheating

5.1 Probability of Failure Data Assurance SGN’s NARM’s model has been developed based on methodology agreed for all networks with Ofgem which requires a set of base data. The base data for this site was originally the output of a data collection exercise conducted in 2011 and has been reviewed to more accurately reflect the current position. Any changes are summarised in the tables below.


14 December 2019

Pressure Control Asset Attributes Modification Reason

CONDITION_SCORE Changed from 2 to 4

The current score is listed as 2, near new but the site is over 40 years old, has never had any work done to the pressure control system and the regulators and associated systems are all obsolete. Obsolescence will be dealt with in “Obsolete Year” but there have been multiple faults on the system that have demonstrated that this system is nearing the end of its life. One example is potentiometers in the system that actuates the control valves failing which prevented that valve from functioning until it was fixed.

KIOSK_CONDITION

Changed from 0.8 to 1

The kiosk for Mappowder pressure reduction system is a roll off cover for each of the two streams. There have been issues with the hydraulic system used to raise the covers. However, the covers themselves are showing signs of deterioration starting to occur but are not yet in that poor a condition.

FENCE_CONDITION

Changed from 2 to 0.8

HIGH_OUTLET_PRESSURE

No change Two A2 faults due to slow slamshut closure. This could cause high outlet pressure if monitor and active failed

Obsolete Year

9999 to 2013. The regulators are a custom version of a Mokveld regulator developed by British Gas Engineering Research Service (ERS) which is no longer supported. The same is true of the associated pilots and control system.

CRITICALITY

0.01 to 1 At LDZ demand levels of 30% and above there would be loss of supplies over a widespread area of Dorset if Mappowder NTS Offtake were not functioning. This is because the Ower to Sopley pipeline connecting the Dorset section of the South LDZ LTS system to the main LTS network is only 8” in diameter, limiting how much gas from other NTS offtakes could be transported into Dorset if Mappowder were not flowing. As such Mappowder should be considered a sole feed.

Table 7: Base Data Review – Pressure Control

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15 December 2019

Preheating Asset Attributes Modification Reason

CONDITION_SCORE Score updated from 1 to 4

The current score is listed as 1, “as new” but the site is over 40 years old, has never had any integrity work done to the pre-heating system and the associated pressure breakdowns and controls are reaching the end of their life.

FENCE_CONDITION

Score updated from 2 to 0.8

LOW_OUTLET_

TEMPERATURE

Changed from 5 to 3

18 low temperature instances have been recorded via our telemetry system over the last six years. This equates to 3 failures per year

NO_EFFECT_PRI

Changed from 0 to 3

18 general failure has been recorded over the 6 years for this system.

Obsolete Year

changed from 9999 to 2013

A number of components within the control system for the water bath heaters, including the Fisher 124’s relays are no longer supported.

CRITICALITY

changed from 0.01 to 1

At LDZ demand levels of 30% and above there would be loss of supplies over a widespread area of Dorset if Mappowder NTS Offtake were not functioning. This is because the Ower to Sopley pipeline connecting the Dorset section of the South LDZ LTS system to the main LTS network is only 8” in diameter, limiting how much gas from other NTS offtakes could be transported into Dorset if Mappowder were not flowing. As such Mappowder should be considered a sole feed.

Table 8: Base Data Review – Preheating

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16 December 2019

6 Consequence of Failure The consequences of failure at Mappowder NTS Offtake vary depending upon the way in which a failure occurs. A matrix of the failure modes and consequences are shown in Table 9 and the worst-case scenario for each of the main impact areas is discussed further.

Failure Consequence

Failure Mode Security of Supply Safety Impact Environmental Impact

Pressure Containing Component within site (Corrosion)

If gas escape is significant, security of

supply could be affected

Safety impact from risk of ignition, proportionate to the volume of the escape

Carbon emissions

proportionate to the volume of the escape

Pressure Regulating Equipment (Both Slamshuts Closed)

Security of Supply would be lost for a

significant quantity of customers with both

slamshuts closed

No direct effect No direct effect

Pressure Regulating Equipment (Over pressurisation of Outlet)

If over pressurisation causes a significant escape, security of


Safety impact is elevated compared to escape

within the site, as this could affect pipework

within proximity to the general public

Carbon emissions


Preheating Equipment (Failure at winter, brittle fracture due to cold temperatures)

If brittle fracture causes a significant escape, security of


Safety impact is elevated compared to escape

within the site, as this could affect pipework

within proximity to the general public (although

chilling will be most severe closer to the site).

Carbon emissions


Table 9 :Matrix of Failure Mode against Failure Consequence

Loss of supply to customers Mappowder NTS offtake is key to the gas supplies to the whole of Dorset as it is the only supply into the Local Transmission System (LTS) in the south west of South LDZ. The LTS in Dorset is linked to the rest of the system supplied by other NTS offtakes, the closest of which is Braishfield but the pipeline linking Dorset to the rest of the LTS system is 8” diameter, limiting how much gas can be transported into Dorset without Mappowder. Analysis of the how much of each NTS offtake can be supplied from elsewhere in the event of an emergency is undertaken annually and due to the flow limitations on the 8” Sopley to Wytch Farm pipeline (P058) loss of supplies to customers in Dorset would begin at LDZ demands above 30% without Mappowder NTS offtake.

Safety Impact of failure Mappowder is in a rural location so there is no significant risk to members of the public directly at site from a failure. There are risks for employees if they are present on site during a failure and this depends on the nature of the failure. There is a safety impact downstream because of a pipe failure which could occur if the site was operated without pre-heating for a prolonged period. This is the case for a lot of the year, including all the winter period.


17 December 2019

Environmental impact There are several potential environmental impacts possible if a failure at Mappowder were to occur. Firstly, there is the possibility of a release of gas at pressures up to the maximum operating pressure of the National Transmission System (NTS) which supplies the site. This would result in a significant release of gas into the atmosphere until remedial actions could be taken to stop the leak. The other main environmental risk associated with the existing equipment is a loss of glycol containment on a water bath heater which would result in the glycol mixture being released into the ground water system and the local environment.

7 Options Considered Within this Engineering Justification Paper there are several options which have been considered and discussed to address the issues at Mappowder NTS Offtake. The 4 core options being considered are as follows:

• Replace on Failure • Repair on Failure • Pre-Emptively Replace • Pre-Emptively Repair

When considering this intervention, we have done so following our 4R strategy. This strategy is designed to maximise the asset life and minimise the capital expenditure of intervention and in doing so sets out an order of preference for the intervention type. This order is key in delivering customer value and focuses on the lighter intervention options of repairing and refurbishing the asset before considering more severe interventions such as full replacements of the existing assets. See below for an illustration of our 4R strategy:

Figure 11: 4R Strategy

Following this strategy, the options of a reactive repair or proactive refurbishment are typically considered ahead of proactively rebuilding the site or carrying out a replacement reactively.


18 December 2019

7.1 Replace on Failure The option to replace equipment on failure was considered but was rejected as the loss of either the pre-heating or pressure reduction systems on site would lead to major security of supply issue for most of the year. The lead times for a replacement pressure reduction skid are in excess of 12 months based on SGN’s experience during RIIO-GD1 during which time SGN couldn’t meet its licence obligation to supply gas to Dorset. Similarly, the lead time for a heat exchanger and modular boiler system is 3-6 months for a modular boiler house and 9-12months for a heat exchanger skid.

Not viable – License condition breach

7.2 Repair on Failure The option to repair equipment on failure was considered but was rejected as the regulators and associated pneumatic control systems are all obsolete meaning a repair is not possible. The control systems on the water bath heaters are also obsolete prohibiting a repair. It is possible that a repair could be undertaken to the water bath heaters themselves, depending upon the nature of the failure but previously attempted repairs on units at or past their original design life have proved expensive and the rest of the unit is still in the same condition so further problems were often experienced.

Not viable – License condition breach & not technically possible

7.3 Refurbishment The option for equipment refurbishment was considered but was rejected as the regulators and associated pneumatic control systems are all obsolete and no longer supported by the manufacturer who would undertake a refurbishment. In addition, SGN have undertaken refurbishment of control valves in GD1 at Braishfield B system using the original equipment manufacturer and this proved unsuccessful after several attempts.

The control systems on the water bath heaters are also obsolete so a bespoke replacement would need to be designed. While it is possible that a repair/replacement could be undertaken to elements of the water bath heaters themselves, it is a matter of how much to replace and the risk that the unit presents after any refurbishment. Previously attempted repairs/modifications on units at or past their original design life have proved expensive and the rest of the unit is still in the same condition so further problems were often experienced.

Not viable – Not technically possible

7.4 Targeted Component Replacement The option for targeted component replacement was considered but it was ultimately deemed to be not viable due to the level of risk during construction and the length of the pressure reduction streams. The pressure reduction system is surrounded by a bund for noise reduction which limits access to the streams. This means that the contingency should something go wrong either with the replacement control valves or during the operation would involve shutting out the site until remediation could be undertaken. As such the risk of finding ourselves in a situation of having to replace on failure during the project was considered too high. In addition, the length of the existing regulator streams is not long enough to allow the stream to comply with the current version of TD/13.

Not viable – High risk of License condition breach & not technically possible


19 December 2019

7.5 Replace the Pressure Reduction and Pre-Heating Systems Replacing the pressure reduction and pre-heating systems is the preferred option as it addresses the condition of the equipment and safeguards security of supply to 138,800 customers in the Dorchester, Weymouth and Wareham areas of Dorset by addressing the risks associated with the pressure reduction and pre-heating systems. The project would commence in 2021/22 and be completed by 2025/26.

Viable – Preferred option

The technical detail of the option i.e. capacity, system rating, availability etc. The replacement pressure reduction and pre-heating systems at Mappowder NTS Offtake, have been designed to incorporate the predicted load growth for the next ten years, 217 kscmh and has a heat requirement of 2,190 Kwh. The system will be twin stream with 100% redundancy in accordance with IGEM TD/13. Each stream will contain a Slam Shut, 1st Stage regulator, 2nd stage regulator and a means of stream selection, to ensure independent operation of the slam shuts. The system will be rated for an inlet pressure range from 75BarG to 38BarG, with the outlet pressure range from 32.4BarG to 9BarG.

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20 December 2019

The basis for the cost estimate A budget estimate for the cost of delivering the proposed project at Mappowder has been undertaken jointly by and SGN. This draws on the expertise of one of the design houses we have partnered with to deliver projects in RIIO-GD1 meaning they understand many of the problems that have been encountered while delivering these projects.

This was done by conducting a desktop pre-feasibility study assessment of the project and how it could be delivered.

SGN has experienced projects within RIIO-GD1 where the scope of the project had to be changed during the design process when it became evident that the original proposal was not viable. This was the case at Lordswood PRS where a full site rebuild was the plan for the site but it was not until the detailed design stage that remediation of valves outside the fence boundary was included to resolve leaks and ensure that these valves, which were to be left open as a result of modifications to the site inlet pipework, were fit for purpose into the future. This was a sound engineering decision but added a significant cost to the project that had not been forecast earlier in the project life cycle.

To develop the budget estimate a number of sources were used to derive aspects of the price. These were:

1) Indicative estimate of the cost from a supplier of the activity. While this cost estimate was being provided by a service provider or supplier relevant to the activity or item it is being done prior to any tender documentation, specifications or design work having been undertaken. This was the method by with the following were estimated:

a. Design costs

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21 December 2019

b. Materials whenever possible but this does also include some use of previous projects. Materials costs is an area which experienced a significant upward pressure during GD1 as all networks were tendering at the same time.

2) Based on previous costs incurred during RIIO-GD1. There have been many projects delivered offering a wide variety of interventions during GD1 which provide a selection of similar costs to draw from when estimating future costs. This was the method by which the following were estimated:

a. Cost control, covering tender preparation and evaluation, Quantity surveying and post construction evaluation.

b. Specialist Services such as construction supervisor, CDM management, Pipeline Inspector, hydrostatic pressure testing and radiographic inspection of all welds.

c. Main Works Contractor (MWC). This is an area which had a significant upward pressure during GD1 due all networks tendering at the same time. These costs are very market dependant, based on how much work the contractors have at the time.

d. E&I costs. These are the costs other than those already covered within the design and MWC for a specialist E&I contractor and materials.

e. Miscellaneous other costs such as records collection, planning permission, land purchase, direct labour and removal of redundant equipment.

All values in Table 10 are net costs before any adjustments for efficiencies, overheads, operational difficulties and other factors.

The perceived benefits of the option Removal of immediate risk to customers, for both security of supply following a failure of the regulators, with the associated long lead time on key pieces of equipment and risk of exposing the outlet to extremely cold gas with the potential creating gas leaks, frost heave or poor control of the regulators.

Delivery timescales 2021 to 2022 - Design

2022 to 2023 - Procurement

2023 to 2025 - Main Works Contractor, including decommissioning and removal of redundant systems

Key assumptions made The site cannot be shut out, even during the summer, for a long enough period to facilitate replacement of the pressure reduction system in place so due to lack of space the site will need to be extended. Major projects identified additional costs from the desk top exercise, to the cost of the main works contractors and pressure reduction skids increasing significantly, based on experience of current projects.

Any other items that differentiate the option from the others considered This is the least cost fit for purpose option. The only other viable option would be to undertake a complete site rebuild costing millions of pounds more.


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7.6 Complete Site Rebuild The option to undertake a complete site rebuild was considered. While it also resolves the issues on site, replacing only the pressure reduction and preheating systems achieves this objective for a considerably lower cost, so it has been rejected.

Viable – Rejected as not least cost option

7.7 Do Nothing or Deferral to GD3 The option to do nothing or defer the project into GD3 was rejected as it doesn’t address the risk to gas supplies presented by the condition of these assets and the risk of a major gas supply incident increases the longer equipment in this condition is continued to be operated. A project of this scale takes years to deliver so deferring it into GD3 is deciding that obsolete equipment with no source of spares that has an increasing frequency of issues will last for another 10 years. It is highly likely that this is not the case making this option equivalent to replace on failure.

Not viable – License condition breach

7.8 Options Technical Summary Table The following options all generate catastrophic consequences or present an unacceptably high risk during delivery and are therefore deemed unacceptable:

• Refurbish components, • Replace on failure, • Repair on failure, • Targeted component replacement, • Do nothing.

Therefore, only one practicable option remains – the component replacement of the volumetric control system and the gas pre-heating system.

Other options, such as full rebuild of all systems, have not been considered as they represent unnecessary expenditure to replace functioning, fit for purpose assets.

Option First Year of Spend

Final Year of Spend

Volume of Interventions

Design Life (Yrs)

Total Cost (£m)

(Gross) Replace on failure Not viable option

Repair on failure Not viable option

Refurbishment Not viable option

Targeted Component Replacement

Not viable option

Pre-Emptive Replacement of Preheating and Pressure Reduction systems

2021/22 2025/26 2 systems 40 6.08

Complete Site Rebuild Viable option but not costed as would cost millions more than replacing only the systems at risk.

Do Nothing Not viable option

Table 11: Options Technical Summary Table


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7.9 Options Cost Summary Table The costs in Table 12 are net costs, before any efficiencies, operational difficulties, overheads and other factors are considered.

Option Cost Breakdown (£m) (Net)

Cost (£m) (Net)

Replace on failure Not viable option

Repair on failure Not viable option

Refurbishment Not viable option

Targeted Component Replacement Not viable option


Complete Site Rebuild Not viable option

Do Nothing Not viable option

Table 12 : Options Cost Summary Table

8 Business Case Outline and Discussion The failure of the obsolete pressure reduction system or water bath heaters at Mappowder is a High Impact Low Probability event (HILP). Several options to resolve this have been investigated but most have proved to not be viable. This is discussed further in section 7 and summarised in Table 12. The two viable options are to replace the pressure reduction system and water bath heaters or to undertake a complete site rebuild. The lowest cost option is therefore to replace the obsolete pressure reduction system and water bath heaters which have been assessed through SGN’s NARM’s model software, C55 Investment Decision Optimisation from Copperleaf. The resulting 35yr NPV for this option is £325.78m.

8.1 Key Business Case Drivers Description The Cost Benefit Assessment (CBA) for both the baseline position and the preferred option is as follows shown in Figure 13.

Note: This data has been extracted from the Authority’s RIIO GD2 CBA template and using the output from SGN’s Monetised Risk solution , which has been fully validated against the Network Output Measures methodology.




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Figure 14: CBA for preferred option

The detail behind these trends are as follows:

NPVs based on Payback Periods (absolute, £m)

Option No. Desc. of Option

Preferred Option (Y/N)

Total Forecast Expenditure

(£m)

Total NPV 2030 2035 2040 2050

Baseline Repair on failure N -0.41 -410.80 -69.24 -133.74 -191.14 -287.99

1 System Replacements (Absolute NPV) Y -6.47 -17.22 -6.73 -8.02 -9.13 -11.38

1 System Replacements (Relative to Baseline

NPV) Y

-6.47 -17.22 62.52 125.72 182.01 276.62

Table 13: Summary of CBA Results

Data for the CBA has been taken directly from the Monetised Risk / NARMs methodology as coded and validated within the C55 solution.

The modelled failure modes are expected to generate repairable failures (failure rates > 1) rather than end-of-life failures (maximum failure rate = 1). The current version of NARMs Methodology (V3.2) duly provides escalating long-term benefit. The failure rates calculated are based on exponential degradation which increases significantly over long term. To realistically assess the CBA produced by NARMs, the values used in this CBA calculation are capped based on engineering judgement and to take into account ‘mean time to repair’ and increased observation post failure.

The failure node for transmission assets are grouped into the following categories:

1. Catastrophic Failure: End-of-life failure leading to an unconstrained Release of Gas. 2. System Failure: failure leading to lack of control such as:

High Outlet Pressure High Outlet Temperature

3. General Failure: minor issues not leading major consequence.

-450-400-350-300-250-200-150-100

-500

0 10 20 30 40 50

Cost

s (£m

)

Years

Mappowder

Without Intervention Option 1


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Failure Node Failure category Capped at Preheating - Release of Gas Catastrophic Failure 1

Preheating - General Failure General Failure 10

Preheating - High Outlet Temp System Failure 5

Preheating - Low Outlet Temp System Failure 5

PC&F - Release of Gas Catastrophic Failure 1

PC&F - General failure General Failure 10

PC&F - High Outlet Pressure System Failure 5

PC&F - Low Outlet Pressure System Failure 5

Table 14: Probability of Failure Capping

The capping is implemented from 2021 so some systems may already have exceeded the limit by that point and will be capped at that level onwards.

This capping eliminates the noise created by exponential degradation which an asset realistic would never be in operation. These capped failures refine the CBA to a more realistic output in accordance with the asset management principles.

Option Key Value Driver Replace on failure • long term loss of supply to customers while the project is being

undertaken. • Unknown amount of damage caused by failure.

Repair on failure • long term loss of supply to customers while the project is being undertaken.

• Unknown amount of damage caused by failure.

Refurbishment • long term loss of supply to customers while the project is being undertaken.

Targeted Component Replacement

• long term loss of supply to customers while the project is being undertaken.


• Continuity of supply and reduction in both safety and environmental risks associated with the loss of heating and brittle failure of the downstream systems.

Complete Site Rebuild • Continuity of supply and reduction in both safety and environmental risks associated with the loss of heating and brittle failure of the downstream systems.

Do Nothing • Potential, long term loss of supply to customers, safety and environmental impact due to cold fracturing. Protection of the downstream system, ensuring SGN does not have a “system failure” means the unintentional release of stored energy from a pressure system.

Table 15: Key Value Driver Summary


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8.2 Business Case Summary Only one option is deemed adequate to reduce the probability of failure of the pre-heating and volumetric / pressure control systems and to mitigate the consequences of failure at Mappowder offtake.

The preferred option is therefore to replace the pre-heating and volumetric / pressure control systems at a gross cost of £6.08m.

Replace Pressure Reduction & Pre-Heating Systems

GD2 Capex (£m) 6.08 Number of Interventions 1.00 Carbon Savings ktCO2e (GD2) 4507.33 Carbon Savings ktCO2e /yr 901.47 Carbon Emission Savings (35yr PV, £m) 7.43 Other Environmental Savings (35yr PV, £m) 0.00 Safety Benefits (35yr PV, £m) 36.06 Other Benefits (35yr PV, £m) 288.13 Direct Costs (35yr PV, £m) -5.83 NPV (35yr PV, £m) 325.78 High Carbon Scenario Carbon Emission Savings (35yr PV, £m) 11.14 High Carbon NPV (35yr PV, £m) 329.50

Table 16: Business Case Matrix

9 Preferred Option Scope and Project Plan 9.1 Preferred option The preferred option is to replace the pressure reduction and pre-heating systems alongside the associated electrical and instrumentation (E&I) equipment at Mappowder NTS Offtake.

9.2 Asset Health Spend Profile Asset Health Spend Profile (£m)

Intervention 2021/22 2022/23 2023/24 2024/25 2025/26 Post GD2

Replace Pressure Reduction & Pre-Heating Systems and associated E&I

0.26 0.42 1.81 3.33 0.25 0

Table 17: Asset Health Spend Profile

9.3 Investment Risk Discussion

Sensitivity Analysis Sensitivities have been applied to the Transmission Integrity CBAs as follows:

• Variations in Capex project cost have been applied for the range -10% to +20%. These are considered realistic ranges based on our experience in GD1 and the likely pressures on cost in relation to the procurement of materials and main contracts.

• Variations in methane levels (and therefore environmental impact) have been considered to take account of the anticipated introduction of hydrogen. SGN have committed to a ‘net zero’ carbon network by 2045. In practice that means no methane by that date. Also, while the use of hydrogen in distribution is being actively investigated and hydrogen is currently being introduced into a


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network for the first time since the conversion to natural gas, it is considered very unlikely that hydrogen will be injected on a wider scale until RIIO-GD3. For these reasons, methane levels have been considered in three ranges: aggressive early transition, mid-case and late transition.

Figure 15: Methane / Hydrogen transition - Sensitivities

The current version of the CBA template, version 4, already acknowledges that methane is estimated to be 28 times more damaging than CO2. This figure is taken from the IPCC Fifth Assessment Report published in 2014. Since this figure is derived from the latest science, it is not considered prudent to test for sensitivity in this area.

Sensitivity in the value / cost of carbon is already included within the CBA template with base-case and high-case scenarios mapped out. These sensitivities are considered sufficient in our CBA.

The failure rate has been assessed and capped to produce a representative monetised risk number as described in 8.1. However, it has been identified some factors in the NARMs methodology can contribute towards an enormous monetised risk. In this instance the criticality factor of 1 increases the probability of consequence (PoC) suggesting a failure resulting in a high loss of supply consequence.

This is only true if such failure occurred in a 1:20 demand scenario and the impact would be less substantial over summer. Therefore, additional sensitivity has been carried out on Mappowder offtake. These sensitivities are:

• Single source supply – failure occurs during winter period causing significant supply interruption • Weak Multi source supply – failure occurs during summer period when demand can be met by

other NTS Offtakes up to 30% LDZ demand.

Low Mid High GD2 Capex (£m) 5.47 6.08 7.30 Number of Interventions 1 1 1 Carbon Savings ktCO2e (GD2) 4,507 4,507 4,507

Carbon Savings ktCO2e /yr 901 901 901

Carbon Emission Savings (35yr PV, £m) 7.4 7.4 7.4 Other Environmental Savings (35yr PV, £m) 0 0 0 Safety Benefits (35yr PV, £m) 36.1 36.1 36.1 Other Benefits (35yr PV, £m) 288.1 288.1 288.1 Direct Costs (35yr PV, £m) -5.2 -5.8 -7.0

NPV (35yr PV, £m) 326.4 325.8 324.6 Table 18: Sensitivity Results – Criticality Single Source


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Low Mid High GD2 Capex (£m) 5.47 6.08 7.30

Number of Interventions 1 1 1

Carbon Savings ktCO2e (GD2) 5,250 5,250 5,250

Carbon Savings ktCO2e /yr 1050 1050 1050

Carbon Emission Savings (35yr PV, £m) 8.6 8.6 8.6

Other Environmental Savings (35yr PV, £m) 0 0 0

Safety Benefits (35yr PV, £m) 38.6 38.6 38.6

Other Benefits (35yr PV, £m) 30.0 30.0 30.0

Direct Costs (35yr PV, £m) -5.2 -5.8 -7.0

NPV (35yr PV, £m) 72.0 71.4 70.2 Table 19: Sensitivity Results – Criticality Weak Multi Source

Project payback has not been carried out as part of this analysis due to the effect of the Spackman approach. For a cash-flow traditional project payback period please see scenario 4 of our Capitalisation Sensitivity table

Capitalisation Rate Variation Consumers fund our Totex in two ways – opex is charged immediately though bills (fast money – no capitalisation) and capex / repex is funded by bills over 45 years (slow money – 100% capitalisation). The amount deferred over 45 years represents the capitalisation rate. Traditionally in ‘project’ CBA’s the cashflows are shown as they are incurred (with the investment up front which essentially is a zero capitalisation rate). Therefore, we have developed scenarios that reflect both ways of looking at the investment – from a consumer and a ‘project’.

The scenarios are summarised as follows:

• Scenario 1 - we have used the blended average of 65%, used in previous iterations of this analysis. • Scenario 2 - we have represented the Capex and Opex blend for the two networks, as per guidance. • Scenario 3 - addresses our concerns on capitalisation rates whereby Repex and Capex spend is

deferred (100% capitalisation rate) and Opex is paid for upfront (0% capitalisation rate). • Scenario 4 - this reflects the payback period in ‘project’ / cash-flow terms and provides a project

payback.

We have taken a view of the NPV in each of the scenarios, with the exception of scenario 4, at the 20, 35 and 45 Year points, to demonstrate the effect of Capitalisation Rate on this value.

Scenario 1 2 SO 3 4

Capex (%) 65 38 100 0

Opex (%) 65 38 0 0

Repex (%) 100 100 100 0

Output

NPV (20yr PV, £m) 192.97 192.70 193.90

NPV (35yr PV, £m) 325.79 325.78 326.26

NPV (45yr PV, £m) 393.55 393.57 393.86

Payback 0.00 0.00 0.00 1.00

Table 20: Capitalisation Rate Variation


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Appendix A - Glossary of Terms Cost benefit analysis (CBA) – economic assessment of available options to resolve a problem. CPNI - Centre for the Protection of National Infrastructure. Engineering Research Station (ERS) - A research and development arm of British Gas that no longer exists. Electrical and Instrumentation (E&I) – commonly used acronym for all electrical, instrumentation and control systems on operational gas sites. High Impact Low Probability (HILP) – A term to explain an event which would create a very significant impact if it were to occur but has a very low likelihood of occurring. Local Distribution Zone (LDZ) – A geographic area used determined based the configuration of the gas network and used for billing. Southern Gas Network consists of South and South East LDZ’s. Liquified Natural Gas (LNG) – Gas that has been cooled sufficiently to cause it to change from a gas into a liquid. Commonly used to transport natural gas by ship around the world. Local Transmission System (LTS) – A high pressure gas transportation network within a distribution networks control. These are supplied from the NTS and transport gas to town and cities before using PRS to supply lower pressure tiers. Main Works Contract (MWC) – For large engineering projects a contract with a principal contractor is tendered to construct the project. Non-Destructive Testing (NDT) – inspection methods used to assess the condition of equipment that doesn’t have any impact on the integrity of the equipment being inspected. An example would be using X-Rays to inspect pipeline welds to ensure that they meet the specification. Network Asset Risk Models (NARM’s) – The methodology used to create a common monetised risk for all gas distribution network assets. National Transmission System (NTS) – The bulk transportation system for gas in the UK from major inputs such as gas terminals and LNG stations to LDZ offtakes and very large users such as power stations. Pressure Reduction System (PRS) – Installation used to reduce the pressure of gas between pressure systems. Water Bath Heater (WBH) – A type of gas pre-heating system that heats a large volume of water through which gas pipes are run in order to exchange heat from the water into the gas. They were used on sites with a high heating requirement.


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Appendix B - References 1.

Commercial Confidentiality, Security

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