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Eleme Petrochemical Company Limited

8thto 10thJune 2009

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Insurance Survey of,

Eleme PetrochemicalsCompany Limited, PortHarcourt, Nigeria

8thto 10thJune 2009

Draft

Charles Taylor technical

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Report for

United Insurance Brokers,Mansell Court,69 Mansell Street,London,E1 8AN

Main Contributors

Doug Scott

Issued by

Eur Ing Doug ScottB Tech C Eng CSci F I Chem E MEI

Reviewed by

Jeff AshmanBEng (Hon) C Eng MIEE

Approved by

Richard RadevskyBSc, CEng, CSci, CEnv, PEng, FICE, FCIWEM,MEI, MIFireE, FCIArb

Ch l T l t h i l

Insurance Survey of,

ElemePetrochemicalsCompany Limited,Port Harcourt, Nigeria

8thto 10thJune 2009

Draft

Charles Taylor technical

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i

Executive Summary

Introduction

Charles Taylor technical has been commissioned by United Insurance Brokers (UIB) toproduce an underwriting risk survey report, for insurance purposes of the Eleme

Petrochemical Company Limited facilities at Port Harcourt Nigeria.

Significant Changes Since the Last Survey

The site has undergone significant renovation since the last survey in 2006. Therehave been two further shut downs for refurbishment andf improvements after the lowlevel of maintenance during the years of NNPC ownership. A small project has beenundertaken to provide Virgin C5feedstock to one of the furnaces. There has been anincident involving the Olefin plant cold box but this has been resolved without the

need for an insurance claim.

The plant is operating normally with the main limitation on production being theavailability of feedstock.

The Site

Eleme Petrochemical Company Limited (EPCL) was originally a subsidiary of theNigerian National Petroleum Organization Corporation (NNPC) but was sold to

Indorama in May 2006. EPCL operates an olefins plant and downstream units,mostly polymers at Port Harcourt Nigeria. The facilities date from the mid 1990s.

Natural hazards in the area are modest.

The facilities are relatively modern with good spacing between the individual processunits, utilities and the storage area. However, there is an element of congestionwithin some of the process facilities. The level of loss prevention features variesbetween process units, with only a limited number of remote isolation valves on large

process inventories in the ethylene plant.

Storage facilities are generally to modern standards but unusually, for a relativelynew facility, do not have independent high level alarms.

Administ rat ion

P i t th l f EPCL t I d NNPC i t i d ll ti ht t l

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Activities in most areas follow accepted industry practice but are, sometimes at anearly stage. For example, the site will use the MAXIMO Computerised MaintenanceManagement System (CMMS) but this is still at an early stage of implementation,

Whilst some updating of procedures and documentation has been undertaken, thereis still room for improvement, even in some of the procedures which have alreadybeen updated.

Fire Protection

The fire detection and protection systems have been overhauled and are largelyoperational. However, a number of defective alarm systems were noted around thesite.

One of the electrical fire pumps was in continuous operation to supply water for washdown and a significant number of fire fighting hoses were being used for operationalreasons.

New investment includes a replacement fire alarm system in the polyethylene plant

and a new fire truck.

In summary, EPCL has vastly improved in terms of mechanical integrety as a consequenceof the capital expenditure mantainence turnarounds since Indorma took over the facilities.The focus now needs to be in improving procedural aspects and ensuring all documentationat the site is updated.

Insured Values

The replacement values for the facilities were estimated by AVC (of the UK) in 2006 to beUS$ 868 million. The property values have not been increased since.

The business interruption sum insured is US$ 83 million with a 12 month indemnity period.

Loss History

Since Indorama took over the site, there have been two claims:

May 2008 damage to cold box, this was subsequently withdrawn

June 2009 loss of production as a consequence of lack of feedstock, currentlyestimated at US$ 4 million.

Loss Estimates

Scenario

PropertyDamage

(US$

BusinessInterruption

(US$Combined

(US$ illi )

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Recommendations for Risk ImprovementTen recommendations were made as a result of the survey:

Recommendation Descripti on Category

09-01 Sampling Procedures Priority

09-02 Fire and Gas Alarm Systems Priority

09-03 Control Room Doors CAPEX

09-04 Urea Formaldehyde Foam (Cold Insulation) CAPEX

09-05 Document Control Human Factor

09-06 Operator Emergency Training Human Factor

09-07 Permit to Work (PTW) System Human Factor

09-08 Isolation for Maintenance Human Factor

09-09 Electrical Integrity Human Factor

09-10 Trip By-Pass Procedure Human Factor

The status of the 58 recommendations from previous surveys is summarised below:

Recommendation Summary June 2009

Complet e, 17

No Change, 7In progres s,

23

Withdr awn, 6

Unkn ow n, 5

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Overall Presentation Sheet

Natural Perils 3.5 Management 3.5 Fire and Gas Detection 2.8

7 Parameters 0 0 1 1 5 5 Parameters 0 0 0 2 2 2 Parameters 0 0 0 2 0

External Exposures 2.6 2.3 Water Supplies 3.0

9 Parameters 2 0 1 0 6 6 Parameters 0 1 2 2 1 4 Parameters 0 0 1 2 1

Inherent Hazard 1.0 Permit to Work System 2.9 Drainage 3.0

6 Parameters 2 1 2 0 0 6 Parameters 0 1 1 0 3 3 Parameters 0 0 0 2 0

Layout 2.8 2.3Process Area

Fire Protection 1.9

2 Parameters 0 0 0 2 0 6 Parameters 0 2 1 2 1 6 Parameters 0 1 3 1 0

Control Systems 2.0 2.3 Offsites Fire Protection 1.7

3 Parameters 0 1 1 1 0 3 Parameters 0 0 2 1 0 7 Parameters 1 1 1 2 0

Process Safety Systems 1.9 1.7 2.0

5 Parameters 0 2 2 1 0 3 Parameters 0 1 2 0 0 3 Parameters 0 1 0 1 1

Loading/ Unloading N/A Inspection Procedures 2.9Passive

Protection 1.8

4 Parameters 0 0 0 0 0 5 Parameters 0 1 1 1 3 4 Parameters 0 1 1 0 0

Storage 1.5 2.6 Foam Supplies N/A

5P t 1 2 1 1 0 5P t 0 1 2 2 1 3P t 0 0 0 0 0

Storage areas need some refurbishment Safety procedures are generally to a high stadard.

Limited process safety systems installed but

upgrades being undertaken.

A new management of change procedure has been

developed but still has a number of drawbacks.

Systems appear to be in good condition

Most porducts are transported by truck in a non

haardous form. A new road tanker unloading facility

has been built with basic facilities.Pipeline systems

were not reviewed in detail during the survey

Inspection Procedures are to a generally good

standard with a well trained and enthusiastic

workforce. Some aspects such as Positive Materials

Indentification could be improved.

The site is moving is considering a move to Risk

Based Inspection

Level of passive protection varies between different

process units

Layout between units is generally spacious. There

are some congested areas within the units

A considerable amount of mainteance work has

taken place since the take over by Indorama. The

condition and reliability of the equipment is much

improvied. Routine maintenance issues, such a sthe full implenetation of the MAXIMO planning

system needs

Systems have been repaired and are fully

operational

DCS systems being replaced.

Although control rooms are blastproofed, the doors

are frequently left in the open position.

A new technical serivces function has now been

developed.

Systems examined were generally good. However

some unsealed penetrations through dikes in the

LPG area were noted.

All senior management positions occupied by ex-

pats.

Fire detection systems have been repaired and the

system in the Polyethylene plant replaced.

However, a number of falied loops were noted in

different systems around the site.

Protections

Operating Procedures

Hardware Software

Minor exposure from other facilities. There has

been previous unrest with the local community

Operating procedurs are a mixture of orginal and new

procedures. Some operating manuals appear

limitied and full information was not available.

Some undesirable operating procedures were noted,for example the operation of flare drums on manual

control

Fire water system appears in good condition,. There

is still a problem with use of fire water forwashdown,

etc.

A new permit system has been introduced. And

generally works well but some detailed

improvements are possible..

No problems were noted with drainage during the

survey.

Maintenance

Safety Procedures and

Practices

Management of

Change

Utility Area Fire