Risk management of cost consequences in natural gas transmission and distribution infrastructures

A critical aspect of risk management in energy systems is minimizing pipeline incidents that can potentially affect life, property and economic well-being. Risk measures and scenarios are developed in this paper in order to better understand how consequences of pipeline failures are linked to causes and other incident characteristics. An important risk measure for decision-makers in this field is the association between incident cause and cost consequences. Data from the Office of Pipeline Safety (OPS) on natural gas transmission and distribution pipeline incidents are used to analyze the association between various characteristics of the incidents and product loss cost and property damage cost. The data for natural gas transmission incidents are for the period 2002 through May 2009 and include 959 incidents. In the case of natural gas distribution incidents the data include 823 incidents that took place during the period 2004 through May 2009. A two-step approach is used in the statistical analyses to model the consequences and the costs associated with pipeline incidents. In the first step the probability that there is a nonzero consequence associated with an incident is estimated as a function of the characteristics of the incident. In the second step the magnitudes of the consequence measures, given that there is a nonzero outcome, are evaluated as a function of the characteristics of the incidents. It is found that the important characteristics of an incident for risk management can be quite different depending on whether the incident involves a transmission or distribution pipeline, and the type of cost consequence being modeled. The application of this methodology could allow decision-makers in the energy industry to construct scenarios to gain a better understanding of how cost consequence measures vary depending on factors such as incident cause and incident type.