S C I E N C E : Resea N E Crh Journal Of R I A D M E F O L .

Citation: Mokhtari K (2019) A Quantitative Risk Management Methodology: The Case of Offshore LNG Terminals and Marine Ports. J Marine Sci ResDev 9: 268.Page 2 of 11facilities so that it can be turned into the various finishedproducts in consumers’ daily lives. There are quite a fewlogistical pathways that the midstream sector may follow,including gathering and processing (e.g. through FPSO units),logistics, pipelines, compressor stations, trucking, barges andrail in petrochemical seaports and terminals. The marine and offshore related downstream sector provides theclosest connection to everyday consumers. In the downstreamsector, crude oil or natural gas can arrives at processing plants(i.e. normally in petrochemical seaports) where it is refinedand eventually turned into various products which will thenbe sold and distributed, including: Gasoline, Diesel Fuel, JetFuel, Asphalt, Fertilizers, Liquefied Natural Gas (LNG), andLiquefied Petroleum Gas (LPG) among others.Marine and offshore related energy insurance coverage is generallyarranged on a “package” basis by specialist insurance brokers forupstream, midstream, and downstream exposures, with the latter sectordominating business interruption. These insurance packages typicallyinclude covers for offshore property, business interruption, offshorewell control/re-drilling, and some include third-party liabilities inmarine and offshore activities related areas, including marine pollutionclean-up etc.[6].In addition, according to the physical borders existing in marineand offshore industry, these areas can be extended from inlandterminals or dry ports inside coastal or land locked states up to theother locations beyond the oceans. Figure 1 simply illustrates theseboundaries. In this regard also see the author’s previous works such asMokhtari [5].It must be taken into consideration that in insurance marketin respect of marine and offshore industry there are other types ofinsurance buyers that will not fall under oil and gas sectors or be limitedto energy industry as discussed earlier. There are lots of insuranceproducts as per ICS [7] that still will be related for example to operationsand managements of marine ports and offshore terminals. There areinsurable cargoes such as dry bulk cargoes (i.e. Grain, Iron Ore andCoal etc.); general break bulk cargoes; bagged cargoes; pallets; drums;liquid cargoes such as vegetable oils; containers; International MaritimeDangerous Goods (IMDG) cargoes; finished products such as metals,refrigerated goods; cars and semi manufactured goods etc. As it can benoted many of them naturally are hazardous and dangerous cargoessuch as coal and Sulphur as there is a risk of spontaneous combustion.For others there are risks associated with their carriage such as dangerof their shifting during their transit at sea specially in bad weather;danger of cargo damages due to ingress of sea water into cargo holdsdue to any reason; danger of ice formation on board ships and/or shipsentering into ice regions at sea in upper latitudes; danger of cargo sweetsduring transits of cargoes; damaging of cargoes during their loadingand/or discharging while ships are berthed alongside commercial seaports. As is shown in Figure 1 these cargoes can be transported usingshipping industry and/or using multimodal transports systems whichwill be fallen under logistics industry in different locations of the world.Therefore, subject of insurance and risk management in marine andoffshore industry covers huge geographical, technical and commercialareas and are not only limited to a single industry users and clients.Moreover, based on various sources (IMO [8]; ABS [9]; OCIMF[10]; Maclachlan [11] ) and there are literatures in marine and offshoreindustry which mainly relates to the legislation and safety Acts such asMineral Working Act (MWA) 1971, Health and Safety at Work ActJ Marine Sci Res Dev, an open access journalISSN: 2155-9910Figure 1: Segments associated with operations and managements of offshoreterminals and marine ports (Source: Mokhtari).(HSWA) 1974, Statutory Instrument (SI) Number 289 in 1974 in theUK. All of them have discussed comprehensively about the issues suchas safety cases and safety reports; Safety Management System (SMS);Formal Safety Assessment (FSA); Health, Safety and Environment(HSE); ISPS Code; safety case regulations; Quantitative RiskAssessment (QRA); the concept of As Low As Reasonably Practicable(ALARP) in judging the level of acceptable of the risk. Moreover, inonshore process sectors, risk-based process activities and safety aspectsare discussed mainly under integrity management, safety and reliabilitymanagement or engineering [12]. None of them have described at aholistic level a generic or even specific QRM methodology or frameworkwhich consequently could encompass all the above-mentioned issues.Conversely phrases such as hazards, safety, security, reliability,disaster, emergency, and crisis can all be categorized under the phraseof “risk” itself and even phrases such as quantitative risk assessment,quantitative risk evaluation, quantitative risk analysis, quantitative riskmitigation, also can be considered as subcategories for the phrase of“management”. Therefore, using a phrase of “QRM” alone can justifythese scattered impressions.In the shipping, logistics and process industries and based on theavailable literatures from several sources such as ICS [7] and IMO[8], rules and regulations or safety and security issues have beendiscussed in detail. Among them there are topics such as marineinsurance, including Hull and Machinery (H and M), Protection andIndemnity (P and I), Freight Demurrage and Defense (FD and D), Warrisk and Strike insurances; Construction All Risk (CAR) related toOffshore Installations and Structures Insurances; International LabourOrganization (ILO) and International Maritime Organizations (IMO);Conventions e.g. SOLAS 1974 and MARPOL 73/78; ISM and ISPSCodes; Collision avoidance regulations i.e. COLERG and InternationalMaritime Dangerous Goods (IMDG) Code. They mostly emphasizeon quality, health, safety, environmental and security protectionissues. Some of them, such as COLERG, are designed for the purposeof preventing a risk of collision. Based on Trenerry [13] insurancecovers are being used for risk transferring purposes of the pure risks(i.e. uncertainty of damage to property by fire, flood or the prospect ofpremature death caused by accidents) rather than the speculative risks(i.e. risks which are linked directly to the business function, decisionmaking processes and management). In fact, there is still a lack ofdevelopment and integration of the QRM perception within the abovementioned areas particularly in insurance sector. Ultimately in terms oflegislation in practice, the marine and offshore industry has suffered alot and in the past produced disorderly, conflicting regulations, mainlyin response to disasters involving considerable loss of life, culminatingin the destruction of the Piper Alpha installation in the UK waters in1988. Based on Sharp [3] the Piper Alpha tragedy proved to be thecatalyst for a radical change in the way the industry was both certifiedVolume 9 Issue 2 1000268

Citation: Mokhtari K (2019) A Quantitative Risk Management Methodology: The Case of Offshore LNG Terminals and Marine Ports. J Marine Sci ResDev 9: 268.Page 3 of 11and regulated. Lack of compliance with safety practice and mistakes inproper inspections have been found as main root causes for this caseand for the case of Deepwater Horizon accident in the Gulf of Mexico.Still no one has argued for lack of complying with a generic or anyspecific QRM methodology.A Proposed QRM MethodologyThis part demonstrates the key features of the methodologicalapproach aimed at a consistent quantitative risk management; theprocess and functional analysis of offshore terminals and marineports and the valuation of risk management system. Figure 1, afteridentification of the risk factors (i.e. hazards) illustrates the quantitativeassessment and mitigation schemes in the risk management process,which are briefly described later in this paper. The main aim of theQRM methodology is to detect, quantify and manage the potential riskfactors in all processes and operations that compose the core businessof the system under analysis [14]. Among the available techniquesfor QRM methodologies Fuzzy Set Theory (FST); Analytic HierarchyProcess (AHP); bow-tie method; Fault Tree Analysis (FTA); Event TreeAnalysis (ETA) and TOPSIS (i.e. Technique for Order of Preference bySimilarity to Ideal Solution) method are used under fuzzy environmentin this paper to model the addressed QRM methodology in Figure 2 forthe purpose of offshore terminals and marine ports.Therefore, as is shown in Figure 2 after detecting the potential riskfactors in marine ports and offshore terminals through carrying outan intensive literature review with the aim of hazard identification,then these identified risk factors will be assessed and ranked via usingFAHP method. The required risk-based data with having qualitativeand quantitative natures will be gathered and combined through expertjudgements’ and AHP method to produce quantitative data at the end.In order to deal with the vagueness of the data they will be treatedunder fuzzy environment using FST. Once the identified risk factors areassessed and ranked, each risk factor can be dealt with independentlyregardless of their global risk-based calculated weights (Table 1). Inthis situation it depends to the decision makers, risk managers, safetyengineer and claim handlers in the addressed industry when to dealFigure 2: Proposed QRM methodology in marine and offshore industry underfuzzy environment.J Marine Sci Res Dev, an open access journalISSN: 2155-9910and/or to choose and take which one of the risk factor(s) into theirconsiderations first. Ideally it is expected to choose the most significantrisk factor first into their account in order to take care of it more rapidlyto mitigate it. Therefore, as it can be seen from Figure 2 in order toanalysis each one of the selected risk factors in a quantitative mannerbow-tie method will be used to investigate the potential causes andconsequences of the addressed selected risk factor(s) again under fuzzyenvironment. In this part FTA will quantify the potential basic eventsinitiating and releasing the addressed risk factor and subsequentlyETA will be used to show and calculate the possible occurrences andoutcomes. This offered quantitative risk analysis process for eachindividual risk factor will ensure that there is an adequate treatmentpractice and procedure in place for the purpose of implementingand completing the quantitative risk assessment phase. In the lastpart FTOPSIS method will be used to select the best strategy and/orsolution from among of the multiple choices of introduced strategiesvia a quantitative evaluation process to mitigate a previously assessedrisk factor in earlier phase to complete the QRM cycle.As a result, a proposed framework as shown in Figure 2 is usedto describe a generic methodology that can develop a QRM capabilityby enhancing a holistic RM view that can be contributed in differentoffshore and marine applications. This framework can be usedpractically by safety engineers for the purpose of further diagnosis orcan be used by risk managers during their decision-making processes.In this regard the QRM methodology and framework for the marineand offshore application can be discussed more through the followingphases.Hazard identification phaseMost primarily and first phase in any QRM methodology is hazardidentification (World Bank [15]; GAO [16] and Chartres et al. [17]).“Hazard identification should be approached in a methodical wayto ensure that all significant activities within the organization havebeen identified and all the risk factors flowing from these activitiesare defined” [18]. In this respect although in general terms manycompanies, organizations and government bodies are using the phraseof “risk identification” for the first phase in their QRM proceduresbut more principally in engineering and industrial sectors such as inoffshore structures and marine systems as it is argued by (Paltrinieri etal. [19]; Ren et al. [20]; Pillay and Wang [21]) the phrase of “HAZID”(i.e. Hazard Identification) is used rather than the first one. HAZID isa general term used to express an exercise whose objective is to identifyhazards (i.e. risk factors) and the related events that have the potentialto result in a significant consequence. For example, a HAZID of anoffshore terminal or offshore installation may be conducted to identifypotential hazards which could result in consequences to personnele.g. injuries and fatalities, environmental oil spills and pollutionand property damages or lead for example to production losses anddelays. The HAZID process can be applied to all or part of a marineport, an offshore terminal, a tanker vessel or it can be implemented toexamine operational procedures of organizations. Depending upon thesystem being evaluated and the resources accessible, the process usedto conduct a HAZID can be different [9]. As an example, in sea portsand offshore terminals especially in crude oil, LNG and LPG importand export terminals HAZOP (i.e. Hazard Operability) is the bestsolution for hazard identification purposes. In this respect HAZOP is astructured way of examining the planned or existing process operation.The main aim of a HAZOP study is to identify problems that mayexpose hazard to personnel or equipment or prevent efficient operation[22]. Based on Mokhtari [5], literature search is one of the HAZIDVolume 9 Issue 2 1000268

Citation: Mokhtari K (2019) A Quantitative Risk Management Methodology: The Case of Offshore L

of “risk” itself and even phrases such as quantitative risk assessment, quantitative risk evaluation, quantitative risk analysis, quantitative risk mitigation, also can be considered as subcategories for the phrase of “management”. Therefore, using a phrase of “QRM” alone can justify these scattered impressions.