INTERIM REPORT ON ROUGH INCIDENT Following the incident at the Rough facility on 16 February 2006 Centrica Storage Limited (CSL) is making regular weekly announcements to our Customers and Market Participants as to the status of the Rough facility. CSL is now also in a position to be able to provide a more detailed report on the work necessary to bring the facility back to operational status. Repair and reconstruction work offshore is continuing and remains on schedule. There is no change to the estimated dates for resumption of operations given in our announcement of 24 March 2006. Our current best estimate of the date of resumption of injection operation remains 1st June 2006. Our current best estimate is that full production rates will be available from 1st October 2006 at latest. Both these estimates remain subject to change. CSL's declaration of force majeure within clause 18.1 of the Storage Services Contract (“SSC”) remains in full force and effect. This is an interim report based on CSL’s current knowledge. In view of the ongoing investigation and continuing work to validate recovery plans, the assumptions, work scope and timescales described in the report are subject to change. 1. Current Status of Investigation The cause of the incident on 16 February 2006 remains under investigation by the Health & Safety Executive ("HSE") and it would be premature for us to speculate on the results of that investigation beyond our statement made on 20 February 2006. We can confirm that our understanding is that the HSE are focusing on the apparent catastrophic failure of a cooler unit in one of the four production trains and the explosion which occurred in that vicinity. The relevant equipment is being forensically examined by the Health and Safety laboratory in Buxton, Derbyshire. Whether and in what form any report by the HSE is made public is a matter for the HSE. CSL will in any event continue to comply with its obligations under the SSC, including providing reasonable further details of the occurrence and nature of the Force Majeure event to its Customers, when it is in a position to do so. The conclusions of the HSE investigation may impact on the scope of work to recover operations and the future operating regime at the Rough facility. In particular, as set out in our update notice of 24 March 2006, there are two cooler units on the injection trains which are of the same design as the cooler unit on the production train which failed. The HSE investigation may therefore have implications for future injection operations. For production, as notified in our update notice of 24 March 2006, our current intention (subject to relevant HSE approvals) is to bypass the production cooler units and glycol dehydration units offshore and to run the pipeline to shore wet. 2. Outline of recovery operations to date Following the incident on 16 February 2006 the Platform facilities were shut down in a controlled manner. The ESD and fire deluge systems operated as designed and expected. Following failure of power generation as a result of the fire, the decision was taken at 21:57 on 16th February to suspend 24 hour manning of the 3B Platform. The explosion and fire resulted in the loss of main power generation which is located on platform BP adjacent to the failed cooler unit. Back-up power generators also failed on BP as a consequence within 4 hours of the initial incident. Emergency generation on the BD platform depends on the availability of “tripping power” from the BP platform, and had to be shutdown to prevent damage to itself and associated systems. The first priority identified by CSL for re-manning was safely to restart power and other life support services to the 3B Platform, and therefore restore a safe working environment and allow sufficient manning levels to undertake the incident investigation, damage assessment, as well as the development and implementation of recovery and reinstatement plans. Before any detailed damage assessment and recovery work could begin, several key steps had to be taken to ensure the safety of personnel attending the platform. Initial structural and safety assessments were completed for BD, BP and CD to confirm there was no immediate danger from structural collapse, and to isolate areas where there was any risk from falling objects or damaged walkways. These assessments were completed on Tuesday 21 February. The BD crane was returned to operation on Thursday 23 February and this allowed the lifting of the temporary generation. Adverse weather conditions (including three days of no flying and sea states restricting crane operations) and reduced day light hours hampered CSL's ability to deliver and establish temporary power generators to the 3B Platform to provide a suitable and reliable power supply. These were fully operational by Saturday 4 March. The platform was returned to full time occupancy on Monday 6 March having reinstated essential systems and communications on BD. The reinstatement of the BP crane has also been critical to progress and it was returned to service on Tuesday 28 March. Due to fire damage from the incident it required a full inspection, replacement of the wires and ropes, and repair to the control system. Also, given the absence of power and lighting on BP, temporary lighting was provided to enable 24 hour working. The damage assessment and recovery operation on BP has been ongoing throughout this period. It is following a structured approach which considers each system and identifies the extent of repair or replacement required, so that replacement is only carried out where necessary. 3. Damage Assessment Our current understanding of the incident is that there was a release of gas from the BP09 module caused by a catastrophic failure on the train 3 production cooler (RBPX-4406). Subsequently there was an explosion and fire on the BP jacket. BP09 – Location of Incident Two of the four Production Coolers are damaged and beyond repair (TR3 and TR2) There has been significant damage to connected pipework, including the HP vent system seawater cooling and closed and open drains systems, which are common to the production and injection gas processes. Control, safety systems and electrical distribution cabling and other electrical equipment in the vicinity of the fire suffered extensive damage. 4. Outline of Remainder of the Recovery Plan 4.1 Recovery Options CSL is progressing recovery options which seek to mitigate (as far as possible) the risk that the outcome of the root cause investigation may impact on the utilisation of the remaining production and/or injection coolers. Production A number of options for production recovery have been considered. Full replacement of damaged equipment on a like-for-like basis has been discounted because the lead-time was estimated to be 40 - 50 weeks after closure of the HSE investigation. This would have meant losing the majority of next winter’s production season. For this reason, CSL considers that a "full replacement" option is not appropriate or an efficient option to pursue. The only option which gives reasonable assurance of full and reliable production capacity availability for the 2006/07 production season is to bypass dehydration units entirely and run the pipeline to shore wet. CSL is therefore pursuing this option under the current recovery plan. Other, longer term options, involving the resumption of offshore dehydration will remain under review. Injection Two of the four injection aftercoolers are identical in design to the failed production cooler unit. In view of the uncertainty about the outcome and timing of the root cause investigation, the current recovery plan is based on bypassing these two units. Injection operations will then take place with one cooler unit per injection train. CSL is still assessing the impact on injection performance but our initial analysis suggests that on the assumption of a 1st June start it will be possible to inject at sufficient rates to enable all Rough capacity sold to be filled by the traditional end of the injection season (i.e. end October 2006). Pending the outcome of the HSE investigation, CSL will also retain the option to use all four injection coolers. Conclusions As set out in our update notice of 24 March process reconfiguration has been targeted as the most efficient option to minimise production downtime and return Rough to physical operations in the shortest timescale. Subject to relevant HSE approvals and detailed design, the plan is to bypass the production cooler units and glycol dehydration units offshore and to run the pipeline to shore wet. For injection, the current intention is to by pass the two injection cooler units of the same design as the failed production cooler. 4.2 Outline of Remainder of Recovery Plan The detailed recovery plan remains subject to review and change in the light of the outcome of the investigation and any HSE approvals required. For resumption of injection operations, currently forecast for 1st June, the following are the critical path areas. Many of these relate to common systems also required for resumption of production operations. (1) Cable (electrical distribution, control, safety systems) repair and/or removal and replacement. A repair technique for the less severely damaged cable has been identified and approved. (2) Reinstatement of main power generation (3) Repair or replacement of other electrical equipment including junction boxes, heaters, fans and lighting (4) Repair or replacement of instruments (5) Repair or replacement of pumps, motors, fire and gas detection systems, safety and emergency evacuation devices (6) Inspection for fire damage to mechanical pumps, major plant isolation valves, pressure safety valves and these valve seals and repair or replacement where required (7) Repair of direct damage to and reconnection of vent systems (common utility piping systems including HP and LP gas vents), injection piping systems, cooling and drainage systems. All this work is underway and is currently planned for completion (including testing) by the last week of May. The mechanical and pipework associated with the modification of the injection units to allow bypassing of the two coolers of the same design as the failed production unit is timetabled within the programme of the above critical path items and is currently not expected to impact the 1st June start date. As each system is mechanically completed a full safety, integrity and functional commissioning activity will commence to satisfy internal technical authorities, the independent competent persons and the Health and Safety Executive that the Rough storage facility has been satisfactorily prepared for the re-pressurisation of hydrocarbons. For production, the front end engineering design for the modifications to offshore processing is underway, and damage assessment of equipment which is not common to injection operations is underway. Removal of damaged and unusable equipment is ongoing. The detailed plan for recovery of production operations will be designed to minimise the impact on the injection programme. 4.3 Annual Maintenance In our notice of 10th March CSL said it would consider whether any long lead maintenance items could be brought forward and carried out whilst the facility is nonoperational, in order to reduce planned annual Rough maintenance later in the year. We have not identified any long lead items which could be carried out without causing further delay to the resumption of physical operations. CSL currently plans to declare 10 days of injection and withdrawal maintenance days in early September to perform planned annual maintenance. It is also likely that this period will be used for final tie-ins to ensure the facility is ready for production flows prior to the traditional production season. 5. Communications We will continue to make announcements whenever we have anything significant to report on the status of the Rough Facility or developments as appropriate. In line with Customers' and market participants' wishes we will also continue making a regular weekly update, even if it is to report "no change". The next announcement will be made on Friday 28 April.
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