Baker Hughes sued over safety valves used in German gas storage

By LAUREL BRUBAKER CALKINS
Bloomberg

Baker Hughes used the wrong kind of steel in safety valves installed in a $2.5 billion German underground gas storage field, where ruptures last year rendered some caverns inoperable and threaten to make the entire facility worthless, according to a lawsuit.

Triuva Kapitalverwaltungsgesellschaft, which owns 47 natural-gas storage caverns in a massive salt-dome under Etzel, Germany, that warehouses 15% of the country’s gas supply, claims Baker Hughes supplied defective safety valves that “can crack wide open” if welded into place in a corrosive environment, according to a complaint filed Monday in Houston federal court.

The defective equipment represents “a grave risk of harm with potentially catastrophic consequences,” because a rupture might result in the release of natural gas into the atmosphere and a potentially large fire, Triuva said in the complaint.

Baker Hughes’s German unit has “been in close contact” with the operator of the two Triuva caverns that experienced safety-valve ruptures last year and provided “technical support on an as needed basis,” Melanie Kania, a spokeswoman for the Houston- based company, said in an e-mailed statement.

Kania declined to comment further, citing Baker Hughes policy against discussing current and pending legal proceedings.

The parts were allegedly made from a type of steel normally used in short-term deep-water jobs, where systems are threaded and bolted together. The material is unsuitable for permanent underground systems, as it is difficult to weld properly and welding causes microscopic changes that leave the pipes prone to corrosion cracks, Triuva said.

Baker Hughes’s safety valves were installed in 2009 and 2010 in 30 of Triuva’s caverns. Two of the valves ruptured in February and November of last year, allegedly along defective welds. Those caverns are now unusable and the safety of the remaining gas storage chambers has been put into question, unless the faulty parts can be switched out for ones made from the right steel, Triuva said.

“It is a dangerous material to use in a welded installation,” Mark Holscher, a lawyer who represents the German firm, said in the complaint. “But rather than spend the time, effort and money” to design a safe system using proper materials, Baker Hughes put Triuva’s “property, other individuals and the public at risk” by selling safety valves it knew were “at serious risk of rupture or blowout” if welded.

Baker Hughes managers and engineers met with Triuva in Germany from October to May, but the oilfield supplier has so far “refused to repair, replace or remediate the defective products or assume any responsibility for their failure,” Holscher said.

If German mining regulators yank Triuva’s licenses because they decide the caverns can’t be safely operated, the company says its entire $2.5 billion Etzel investment might become “effectively worthless,” the company said.

In its 2014 annual report, Baker Hughes disclosed a company investigation into “possible equipment failures” with products sold to an unidentified natural-gas storage customer in its division covering Europe, Africa and Russia’s Caspian region.

In footnotes to its financial statements, the oilfield supplier said Feb. 26 it was investigating causes of possible equipment failures in those systems, as well as potential repair or replacement options. The company said it has sold similar products for use in other customers’ natural-gas storage systems in the same regions. It said it couldn’t reasonably estimate what effect the outcome of those investigations would have on the company’s finances.

Triuva said it will ask a jury to award triple damages to punish Baker Hughes for selling safety-valve systems it claims the supplier should have known would fail.

The case is Triuva Kapitalverwaltungsgesellschaft Mbh v. Baker Hughes Inc., 15-cv-02744, U.S. District Court, Southern District of Texas (Houston).

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