The severity and frequency of natural catastrophe incidents have both been trending upwards in many parts of the world. In 2021 alone, natural catastrophe events resulted in estimated insured losses exceeding US$100 billion. Hurricanes result in some of the costliest natural catastrophe-related losses, and 2021 saw a total of 21 named storms form in the Atlantic. This is the third highest on record for a single season, trailing only 2020 (30 named storms) and 2005 (28 named storms).
One notable named storm was Winter Storm Uri, in February 2021. The storm delivered an unprecedented and prolonged arctic wave of freezing temperatures, ice, and snow to upstream and downstream energy assets located in the central and eastern regions of the US. Although direct property damage cost from Storm Uri on an individual site basis was far lower than the 100LL threshold of US$189 million, the event resulted in significant cumulative business interruption costs. Combined damages from this winter storm are estimated by the US National Oceanic and Atmospheric Administration (NOAA) to total approximately US$21 billion.
Natural catastrophe incidents have historically resulted in widespread damage, and Storm Uri was no exception. Texas, which is the leading energy production state in the US, experienced a near-catastrophic failure of its electrical power grid system that services about 90% of the state.
The state’s electrical power grid system operates independently of the national grid, therefore the state relies primarily on its own power generating resources to meet demand. The system struggled to match the rapid surge in demand during the winter storm. This was further exacerbated as the storm caused pipeline terminals, wells, and gas processing plants to shut down or operate at reduced rates, leading to a shortage in the natural gas supply used to generate approximately 50% of the state’s power.
Refining and petrochemical assets in Texas account for half of the state’s energy consumption, and most were forced to operate at reduced capacity or completely shut down at the time of the storm. Distribution networks including export terminals, rail, and pipeline infrastructures were also impacted in several US regions, including the Gulf Coast and Midwest regions. Natural gas supplies to industry were curtailed by more than 50%, and crude oil supply chains were curtailed by more than 20%. Efforts to recover from the winter storm took several weeks, as plant operators assessed and repaired damage to property and machinery, including piping systems, vessels, instrumentation systems, and equipment, before operations could be safely restarted.
Previous process safety incidents, such as those at the Mckee refinery (2007) and La Porte chemical facility (2014), have shown us the consequences of failing to effectively prepare for the hazards from extreme cold weather events.
Facilities and infrastructure are typically designed for the expected weather conditions where they are situated, which partly explains why the impact of “atypical” and extreme weather events is so pronounced. Take for example, freezing conditions in subtropical climates like the US Gulf Coast region, or heatwaves in colder climates. Given the increasing frequency of “atypical” weather conditions, it would appear to not be a question of if, but rather when, the next such event will occur. Those operations in the most vulnerable regions should ensure they have adequate risk management and contingency plans to protect their assets and aid business continuity.
Key focus areas for operators of existing energy assets should include the following:
The construction of new energy assets in regions susceptible to the risks of extreme cold weather events should incorporate freeze protection considerations during the plant design phase. Sites may wish to consider designing for sustained lower ambient temperatures — as opposed to incidental average low temperatures — as the initial added capital investment could be offset by the long-term benefits of lower winterization costs, once operational. The impact of Storm Uri may indicate that sensitivity analysis in the design phase, with respect to expected ambient conditions, may need to consider a wider range than has historically been studied.
Storm Uri reinforced that while the frequency of winter storms of this magnitude is currently relatively low for sub-tropical regions, the impacts to business continuity and business interruption can be severe, and can be compounded by, or create a domino effect. Energy operators should therefore assess their potential risk exposures and dependencies from unprotected (non-winterized) electrical power generators, feedstock suppliers, and customer sources, and ensure that business continuity plans are adjusted accordingly.
The resilience of assets to future climate change needs to be properly assessed to identify, and engineer-out, future vulnerabilities. It is of great importance that best practices relating to preparedness for extreme cold weather are shared widely through reports, conferences, and social media to improve operations, maintenance, and safety activities during extreme weather conditions before, and not after, the next Storm Uri.
 Swiss RE: Global insured catastrophe losses rise to USD 112 billion in 2021, the fourth highest on record, Swiss Re Institute estimates
 Piping systems that do not have flow through them in normal operation