The Risks of Running a Refinery


Risk management is a full-time job, which is why many companies hire us to help identify and protect against risk. Every industry has its risks, and some industries have heightened risks that require a different type of solution. An oil refinery is a business that comes with many risks that are both unique and severe. If you are thinking of opening or buying an oil refinery, it is important to identify your risks and understand how those risks affect your business.

Hazardous Waste

An oil refinery can be a complicated business because many of the waste byproducts you create when refining oil, such as gasoline, are the products that you sell. But for the byproducts that are genuine waste, you need to have specific methods of disposal in place. You also need to have insurance in place in case you have a leak on your facility that can affect the soil and the surrounding area.

Fire Hazards

One of the most dangerous areas of risk at an oil refinery is the risk of fire. An oil refinery is filled with fire accelerants and flammable materials that can create a disaster if not handled properly. Thankfully, the number of fire related disasters associated with refineries is relatively low. But this is still a risk that you must take into account, and that includes the potential for lost revenue as you recover from an accident.

Neighboring Properties

Most areas that zone for refineries also take into account the effect of a refinery’s business on neighboring properties. But the truth is that the unpredictable nature of a refinery business can sometimes put a strain on the relationship with neighboring properties. It is important for a refinery owner to know the laws regarding the treatment of adjacent properties and the steps that need to be taken to protect neighbors. It is also a good idea to put additional insurance in place to protect a neighbor’s property should an unforeseen event take place.

Operational Compliance

The laws regarding the environment and other aspects of the refinery business can change rapidly. A refinery needs to keep up with these laws and do everything necessary to remain in compliance with all local, state, and federal regulations. The best way to avoid fines and any penalties that could affect operations is to have a compliance department in place that is staffed by experts who can keep up with any changes.

Business Risks

The one area where refineries are similar to every other type of corporation is the risk to profitability. A refinery needs to protect against lawsuits, labor disputes, and other operational risks that could affect the company’s bottom line. There is insurance that can be put into place to protect your refinery’s business operations and avoid serious financial loses.

Owning an oil refinery can be a very lucrative investment, but it comes with a long list of risks. Prior to getting involved in the refinery industry, you need to do your homework and become familiar with the risks you, your company, and your employees could face during daily operations.