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DEER PARK, Texas-Shell Chemical Co. could face tens of millions of dollars in property, business interruption and liability losses following a June 22 explosion at an olefins unit at a Shell plant in Deer Park, Texas.
Last week, adjusters were investigating and processing more than 800 claims filed since the explosion, a spokeswoman said. A majority resulted from property damage to homes and businesses in the surrounding community.
Shell provided little information last week about the cause and potential cost of the explosion, though in a statement said the blast caused a fire that burned throughout the day.
"It is too early in the investigation to make any estimates on damages," said Ron Leftwich, assistant treasurer and risk manager for Shell Oil Co., parent of Shell Chemical.
But, some observers say that replacement of one or more of the olefins processors could cost the company as much as $40 million.
Mr. Leftwich refused to comment on Shell's insurance.
An executive for Oil Insurance Ltd. confirmed that Shell Oil Co. is a member of the Bermuda-based property insurance captive. OIL provides $225 million in all-risk property insurance. OIL policies carry a minimum $5 million deductible, though OIL documents say $10 million is a typical deductible.
The explosion in Deer Park occurred in the plant's olefins manufacturing unit. The olefins unit produces ethylene and propylene, which are then used in the manufacturing of such items as plastics and detergents.
The force of the explosion knocked in windows and doors of businesses and homes in the northern section of Deer Park, said Ronald Crabtree, Deer Park's City Manager.
Sources watching the investigation said the cause for the explosion likely is mechanical.
"There's speculation there was a problem in the unit's cracked gas system or cooling system," said Steve Zinger, a consultant for Chemical Marketing Associates Inc. in Houston, who specializes in olefins.
Without knowing the extent of the damage, Mr. Zinger said it is almost impossible to estimate costs. But if one or more of the unit's systems have to be replaced, the cost could be $30 million or $40 million, he said.
"I've been out there 20 years, and I've never seen one this totaled," said Alan Barnes, Secretary and Treasurer for Local 4-367 of the Oil, Chemical and Atomic Workers Union, whose members work at the plant.
He said the accident was probably due to hydrocarbon released from the unit, which formed a cloud that exploded when "it hit an ignition source."
This is the fourth explosion at a Shell plant since January 1996. The most recent occurred a plant in Woodbridge, N.J., last June (BI, June 24, 1996).