Asset owners and service providers

This article discusses the relationship between asset owners, in this case petrochemical plants and oil and natural gas refineries, and non-destructive testing (NDT) contractors, the service providers. The NDT market represents a subsegment of the broader testing, inspection and certification (TIC) industry, a US$125 billion (approximately £98.1 billion) global market.

Improvements in safety remain the primary motivator for TIC services as firms attempt to minimise the probability of catastrophic failure, especially as a result of the several recent high-profile incidents noted in Table 1. This Table illustrates the evolution of the NDT industry in response to technological advancements, end-market demands and regulatory forces over the past two centuries.

NDT services validate the integrity of materials and process equipment by detecting defects and deficiencies that could lead to failure and by providing analyses on asset life, offering a balance between quality control and cost effectiveness. This results in improved performance economics due to reduced repair costs, extended asset life, greater levels of safety, higher asset quality and compliance with standards and governmental regulations. Additionally, capacity utilisation is improved as a result of reduced scheduled or unexpected downtime.

The NDT universe is a highly fragmented market of service providers that includes small, locally operated companies, as well as a select group of larger, more diversified players. Within this market, few independent companies possess the size and scope (across both service lines and end-markets) to operate as a one-stop shop for all end-market customers. I have had personal experience of both extremes, from a small privately owned NDT service provider to a large global NDT company listed on the New York Stock Exchange.

The historical model is for asset owners, large oil companies with multiple refinery assets, to contract with large asset providers with branch assets in the same locations as the refinery assets. This enables asset owners to negotiate competitive rates through national contracts for multiple services. The smaller service companies cannot compete financially as they do not provide significant enough numbers of technicians to be able to quote lower rates.

Our company, which is counted among the smaller service providers, has countered national contract issues by providing specialised services to meet specific damage mechanisms with skilled technicians and engineers. Typical specialist services include evaluation of corrosion under insulation (CUI), evaluation of corrosion under pipe supports, guided wave applications, time-of-flight diffraction (TOFD) applications and detection and evaluation of high-temperature hydrogen attack (HTHA).

Within the broader TIC industry, and the NDT subsector specifically, significant standards and oversight of engineering services and NDT are already in place through organisations such as the American Society of Mechanical Engineers (ASME). However, in response to high-profile incidents, including the BP Macondo disaster (2010), the San Bruno pipeline explosion (2010) and the BP Texas City refinery explosion (2005), a more stringent focus on safety, environmental sustainability and regulatory compliance continues to develop.

This requires a greater oversight by the owner user of the technical abilities of the service provider and the competence of the technicians and engineers. The chemical/petroleum industry is utilising a performance demonstration process with mixed success. The American Petroleum Institute (API) created a performance demonstration programme, which was not accepted by several of the major oil companies; some felt it did not cover enough NDT methods, especially ultrasonic thickness testing, while some felt it was not stringent enough.

The service providers were obliged to obtain certification from multiple sources, incurring travel expenses and lost time. There was clearly a need for an integrated process to cover performance demonstration that would satisfy both the owner users and the service providers. Such a process is now being developed, with a programme meeting the most strenous performance demonstration requirements and approval from major owner operators. This programme will be made available in such a way as to minimise travel and technician downtime and should be functional in stages, beginning this year.

Note: Material and data from an Energy Sector Report by BlackArch Partners have been quoted in this article (

Table 1. Evolution of the NDT industry

 1800s 1920s-1950s 1950s-1980s 1980s-present
Technological innovation ‘Oil and whiting’ and visual inspection methodsMagnetic particle, eddy current, industrial radiography, ultrasonic and acoustic emission testing developed
– Digital radiography, automated phased array 
1895: X-rays discovered by Wilhelm Conrad Röntgen
Data management, risk-based analysis and predictive analytics services 
End-market developments Emergence of NDT within the rail and automotive industry Growth spurred by WW2 and quality requirements across the transportation, maritime, aerospace and industrial sectors
Application of NDT across numerous end-markets, such as energy, healthcare and chemicals Shale play proliferation 
Increased globalisation of international standards and best practice April 2010: BP Macondo oil spill – catalyst for heightened compliance requirements in the GoM
September 2010: San Bruno pipeline explosion – triggered national pipeline regulation movement 
Regulatory forces – Growing but highly fragmented regulatory framework 1976: ASNT establishes NDT Level 3 certification programme Workplace safety rule/SEMS: mandatory MI programmes for all production assets 

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