What lies beneath: hidden risks in pipes and pipelines 

Concerns about aging infrastructure assets have been mounting in many cities around the world, and pipes are no exception. In New York, some water pipes are around 100 years old, while in London they can be as old as 150. There are fears aging networks are reaching critical failure points. In 2018, a water main built in the 1920s gushed 15 million gallons of water on to the streets of downtown Philadelphia, the equivalent of 25 Olympic-sized swimming pools [1]. The city’s mains and sewers have been built over a 200-year period and are continually being replaced. 

Corrosion is a leading cause of all pipeline failures, accounting for as much as 30-40% of damages in oil and gas networks globally, says José Luis Pallarés, Senior Risk Consultant, Liability, at Allianz Commercial: “Corrosion can occur internally due to the corrosive nature of the transported substance and the pipeline material, or externally from factors like abrasive seawater or excessive moisture. It can lead to cracks and holes, allowing substances to leak or explode, potentially causing contamination or fires if flammable materials reach an ignition source.” 

Pipelines can be damaged by wildfires, flooding, earthquakes, landslides, or extreme temperatures – threats that have intensified with climate change. In 2020, after weeks of unusually warm weather, a storage tank in Russia’s Arctic north collapsed and leaked 21,000 tonnes of fuel into rivers when the permafrost beneath its supports melted. A regulator found faults in the tank’s construction and maintenance, and Norilsk, the mining company involved, was fined $2bn [3]. 

Thaw-related subsidence and unstable earth and rock can compromise structural integrity in other Arctic or permafrost regions, including Alaska and northern Canada, according to Nicole Baker, Team Leader, Environmental Impairment Liability, at Allianz Commercial. 

“In the US, vulnerable regions include the Gulf Coast, which is prone to hurricanes and flooding, and California, which faces earthquakes and landslides. Both regions have dense energy infrastructures in ecologically sensitive areas with many water crossings. Mountainous terrains can present risks to structural integrity from landslides and river scour – when flowing water erodes sediment around structures, undermining their stability.” 

Extreme temperatures in winter and summer can strain assets in the Canadian provinces of Alberta and Saskatchewan, as well as the Great Plains region, which spans the US-Canadian border. This is especially true for the extensive networks of crude oil pipelines, which can stretch for thousands of kilometers. 

“The risks of climate and geohazards are likely to intensify in the future, which will increase environmental exposures and the mechanical strain they place on assets,” says Baker. “We expect to see more frequent and severe flooding, landslides, wildfire and river scour. It’s also likely new pipeline projects will be commissioned in complex or remote terrains, where natural hazards are heightened.” 

Theft and the illegal tapping of fuel pipelines is a major problem in some regions and is exacerbated by organized crime. An explosion in the Mexican town of Tlahuelilpan in 2019 killed 137 people, after crowds gathered to collect gasoline from a ruptured pipeline. Third-party interference is also a danger in Nigeria, where incidents of theft or sabotage can incur annual costs in the billions of dollars. Environmental cleanup efforts can be complicated by mangrove ecosystems and swamps.

“Geopolitical sabotage risk has also been on the radar in recent years, especially in the aftermath of the Nord Stream incident,” adds Baker. “The risk is currently heightened in the Baltic-North Sea Corridor, where any response is complicated by the ocean environment and the need for cross-border coordination.”

As tangible risks continue to challenge pipeline operators, regulations are tightening in many jurisdictions. Compliance requirements address integrity management, leak detection, rupture mitigation, methane emissions, habitat protection, and reporting on climate and ESG (environmental, social and governance). 

“Regulatory scrutiny and investor reporting pressures are increasing transparency and the potential liabilities associated with climate-related pipeline risks,” says Baker. “However, with stricter reporting requirements, and modern monitoring and detection methods, events can be caught earlier and their severity reduced.” 

Legal disputes often focus on the environment, the rights of indigenous people, and security concerns. Baker adds there has been a shift towards pollution and climate-related liabilities. Social inflation increases the risk of class actions and large settlements, especially in high consequence areas (HCAs), where incidents can severely impact human health or the environment, leading to substantial penalties and cleanup costs. 

Modern methods for reducing pipeline risk focus largely on leak detection. These can include aerial surveillance with drones or helicopters equipped with cameras and sensors, manual inspections for visible signs of leaks or damage, fiber optic systems that detect vibrations and temperature changes, and even patrols by dogs trained to sniff out leaks. 

Two of the most common technologies used are pigs – devices that travel through pipelines to check for corrosion and cracks and take photos – and SCADA systems, which gather real-time data on flow, pressure, temperature and other parameters. 

“Artificial intelligence (AI) is increasingly important in enabling companies to act before accidents happen,” says Pallarés. “AI tools can learn from processing huge volumes of information – more than a human ever could – and comparing that data with standard situations to detect deviations from normal parameters. AI also allows for greater accuracy over vast distances. In pipelines stretching over 1,000km, often in inaccessible terrain, it is important to pinpoint the location of a potential fault.” 

An up-to-date understanding of the risks operators face is essential for emergency preparedness plans, says Lauxmann. “They must be able to detect many different scenarios and mitigate them in the shortest possible time. Emergency plans need to be regularly updated with the latest sensor data and the workforce trained to detect small anomalies for early detection of failures.” 

Pipelines present multiple risks that can impact many areas of business, says Lauxmann, and specialist risk consultants can help companies enhance their safety management systems with tailormade solutions. At Allianz Commercial, these consultants can be drawn from a team of energy, marine, cyber, property, construction, or liabilities specialists. 

“We want to maintain a dialogue with all our clients in this space,” says Lauxmann. “That includes the construction and energy companies involved, the technology and manufacturing firms, the sustainability experts, logistics managers, safety consultants. This is an extensive risk landscape that spans multiple industries, exists in various geographies, and crosses national borders. Collaboration will be essential in identifying, assessing and addressing risks as they evolve.”