Longford gas plant explosion (1998)

Esso runs the Longford plant in Victoria, the gas processing facility that supplies most of the state's gas. On September 25, 1998, a pump supplying warm lean oil stops, a heat exchanger freezes and, when heat is restored, the brittle steel ruptures: gas escapes, ignites, kills two workers and shuts the plant. The costly part comes next. With no gas, Victoria is left without heating, hot water and the feedstock of its industries, from foundries to pasta factories, for nearly two weeks. The Royal Commission found failures of training, procedure and information flow: operators had not been prepared for the scenario, for want of a hazard study (HAZOP) of the plant, planned since 1995 and never carried out. For insurance the file exposes a blind spot. Physical damage to the plant is modest, the business interruption of its customers immense, and their property policy does not respond since they suffered no damage. Only supplier-failure covers naming the site, or liability claims against the operator, respond. The class action against Esso settled in December 2004 for 32.5 million Australian dollars, payable only to businesses that had suffered property damage or loss flowing from it; households and stood-down workers recovered nothing. The other route, the operator's civil liability, thus leaves pure economic loss aside. Process safety literature has since used it as a standard example of organizational failure.