28th edition100 largest losses in the hydrocarbon industry 1974-2023100 largest losses in the hydrocarbon industry2 2Contents01Foreword0302Introduction 0403Reflecting on the last two years0504Missed opportunities:The consequences of ignoring risk recommendations1305From climate risk,to climate resilience and adaptation1806When business as usual is interrupted2307Managing risks in energy construction2608100 largest losses graphical data2909Details of the 100 largest losses by sector3310Risk engineering position papers 8111Contacts86100 largest losses in the hydrocarbon industry31ForewordAccidents in the hydrocarbon industry have devastating consequences.When they occur,people can be seriously or fatally injured,property destroyed,communities significantly disrupted,and the environment severely damaged.This fact is heartbreakingly apparent when examining the US Chemical Safety and Hazard Investigation Boards(CSB)accident investigations that appear in Marshs 100 Largest Losses in the Hydrocarbon Industry report.The CSBs mission is to drive chemical safety excellence through independent investigations to protect communities,workers,and the environment.The CSB investigates chemical accidents,shares lessons learned,and advocates for safety improvements.In the CSBs 25-year history,the agency has deployed to over 170 chemical incidents and issued nearly 1,000 recommendations that have led to numerous safety improvements across a wide range of industries.Moreover,in just the three years since the CSBs Accidental Release Reporting Rule came into effect in the US in March 2020,the CSB has received reports of 341 chemical incidents involving fatalities at 46 facilities,serious injuries at 185 facilities,and substantial property damage(defined as US$1 million or more)at 160 facilities.In addition to identifying some of the CSBs investigations,this edition of the 100 Largest Losses report includes links to videos produced by the CSB.These videos provide detailed accounts of selected accidents,offering a deeper understanding of the factors involved and the lessons learned from them.The videos make the CSBs investigative findings and recommendations available to millions of people and are part of our strategic goal to advocate safety and achieve change through recommendations,outreach,and education.Driven by the growing focus on environmental,social,and governance factors,there is a greater demand for industry to manage its risks effectively and demonstrate responsible practices.This is especially the case in the chemical industry,given the devastating impacts that a chemical disaster can have on the people who work in a chemical facility and the families who live in the community near it.Marshs 100 Largest Losses report serves as a powerful reminder of the imperative to prioritize safety and prevent losses.It is a message to industry leaders,regulators,and stakeholders to take every possible step to mitigate risks and protect lives and assets.By examining the causes and financial impacts of these significant loss events,we gain valuable insights into the importance of effective risk management,process safety,and organizational culture.Steve OwensChairperson US Chemical Safety and Hazard Investigation Board100 largest losses in the hydrocarbon industry42Introduction Welcome to the 28th edition of Marsh Specialtys 100 Largest Losses in the Hydrocarbon Industry report which details the largest property damage losses from the hydrocarbon extraction,transport,and processing sectors between 1974 and 2023.By examining the causes and trends of significant incidents,we aim to offer valuable insights and lessons that will support and aid organizations across the energy industry to progress and improve operational and risk management practices.This report reflects on the 2022 2023 period,highlighting significant events and their impact on the energy industry,p05.Additionally,feature articles authored by Marshs engineers,advisors,and industry specialists explore:The importance of knowledge sharing across the industry,learning lessons from past incidents,and acting on recognized risks.The reality of climate change and the growing relevance of climate risk assessments for operational and future energy infrastructure.The factors that can affect coverage for business interruption related claims and the importance of reviewing insurance indemnity periods.Primary causes of construction phase losses and ways to mitigate common risks.We provide summary details of each loss in the top 100,and present comprehensive data on the distribution of losses by date,location,and industry sector.It is important to note that the data in this report is drawn from Marsh Specialtys loss database,and the value of losses is reported in two ways:The original property damage value at the time of the incidents occurrence.The adjusted property damage value at December 31,2023 using various cost indices.This enables a like-for-like comparison of losses that have occurred years apart.Loss values include property damage,debris removal,and clean-up costs,but exclude costs related to business interruption,extra expenses,workforce injuries or fatalities,and liability claims.Furthermore,losses during construction and marine transportation,except those involving marine vessels moored at plant docks,are not included.We extend our gratitude to Everen for providing updated claims data and incident details that have allowed us to complete a review of historic losses.As a result of this research,nine past incidents have now been incorporated into the top 100 dataset.Updated data shared by insurance markets is vital to the integrity of this report and reinforces our ongoing commitment to data accuracy and reliability.We invite you to explore the insights and analysis presented in this report,and to learn from past incidents as we all work towards improving the risk landscape and resilience of the energy industry.AUTHORJenni Morrison,MEng MSc AMIChemERisk Data Analytics Specialist(Dubai)CONTRIBUTORNatali Walton Chacin,BEng IMechE EngTech Cert CII Analyst Risk Engineer(UK)p23p26p18p13100 largest losses in the hydrocarbon industry53Reflecting on the last two yearsThe 2022-2023 period was defined by a number of factors that challenged the energy and power industry as well as the global economy.Recovery from the Covid-19 pandemic was further complicated as the spotlight on energy security intensified as a result of the Russia-Ukraine war,soaring energy and commodity prices contributed to inflationary pressures and tightening of fiscal policies,and supply chain constraints impacted most industries.AUTHORSJasper ClarkRisk Engineering Leader,UKNatali Walton ChacinAnalyst Risk Engineer,UK100 largest losses in the hydrocarbon industry6At the same time,the global groundswell of social and political commitments to address climate change and adopt sustainability measures renewed the urgency to transition to clean energy sources.Despite the macro-economic landscape,the current volume and scale of investment in the energy and power industry is unprecedented.The terms energy security and energy transition have become the part of our common language and serve as reminders of how essential the industry is to both developed and emerging economies.The past two editions of this report have highlighted the dynamic factors that can affect the operating conditions and risk landscape for the industry.The 2020 report reflected the aftermath of the active loss period of 2017-2019,while the 2022 report captured the uncertainty,heightened risk considerations,and reduced operational activity through the Covid-19 pandemic.The past two years have been a mix:there was more loss activity in 2022,though this subsided in 2023,particularly in relation to onshore assets.Since our last report,only two incidents have resulted in property damage losses in excess of US$240 million,which is the adjusted threshold for the 100 highest value losses.In researching this edition,we have also revisited historical losses where additional information is now available that may not have been at the time of our previous report publication.Using updated investigation reports and data from insurance markets,we have identified twelve incidents that now qualify for the top 100 ranking.2022-2023 LOSSES ADDED TO THE TOP 100Despite the macroeconomic landscape,the current volume and scale of investment in the energy and power industry is unprecedented.“This is the first upstream sector loss to be added to the dataset since 2016.GULF OF MEXICO JULY 2023#26A fire and large explosion at a gas processing plant.OKLAHOMA,USJULY 2022#44100 largest losses in the hydrocarbon industry7HISTORIC LOSSES ADDED TO THE TOP 100 1974NORWAYUPSTREAMMECHANICAL FAILURE#651982CANADAUPSTREAMMECHANICAL FAILURE#841991NORWAYUPSTREAMMECHANICAL FAILURE#311987USUPSTREAMFIRE AND EXPLOSION#181999ANGOLAUPSTREAMMECHANICAL FAILURE#592003NORWAYUPSTREAMMECHANICAL FAILURE#352007CANADAREFININGFIRE#782013KAZAKHSTANUPSTREAMMECHANICAL FAILURE#212014NETHERLANDSPETROCHEMICALSEXPLOSION#532015USUPSTREAMMECHANICAL FAILURE#272017CANADAREFININGFIRE#992009SOUTH CHINA SEAUPSTREAMNATURAL CATASTROPHE#87100 largest losses in the hydrocarbon industry8Marsh engineers have also analyzed a number of incidents that did not rank in the top 100 but are notable to insurance markets because the combined value of property damage and business interruption claims for each loss was significant.Many of these incidents are still under investigation to determine the cause of the loss,and will undoubtedly provide valuable learnings for energy operators.A fire at a refinery in Spain.SPAIN|APRIL 2023US|FEBRUARY 2022A fire at a refinery in the US on a unit processing alkylate.US|JUNE 2022A fire at a refinery in the US.NIGERIA|FEBRUARY 2022A floating production storage and offloading(FPSO)vessel sank off the coast of Nigeria following a fire and explosion.US|JUNE 2022An explosion at a liquefied natural gas(LNG)facility in the US where investigators identified deficiencies in operating practices and shift crew management.AUSTRIA|JUNE 2022A mechanical incident caused significant damage to a crude oil distillation unit at a refinery in Austria following a legally required water pressure test.US|AUGUST 2023A fire at a refinery in the US.US|SEPTEMBER 2022A fire and explosion at a refinery in the US.Investigators identified violations of process safety rules and inadequate training of workers.US|JULY 2023An explosion and fire on a glycol unit at a petrochemical complex in the US POLAND|SEPTEMBER 2022A fire at a refinery in Poland.Refinery fireEUROPE|2022A fire occurred on a furnace during start-up.The incident is under investigation but it is understood that operational procedures may not have been adhered to which subsequently lead to a gas leak.100 largest losses in the hydrocarbon industry9EXAMINING THE CAUSESOperational discipline In the 2022 report,one of the major risk factors identified was the potential downsizing of operations and loss of experienced staff as organizations focused on recovering from the Covid-19 downturn.While the energy industry demonstrated exceptional resilience and innovation to overcome the challenges during the lockdown period,there have been a number of recent incidents that may indicate a loss of operational discipline.The examples below are not in the top 100 dataset but demonstrate the importance of embedding robust operational processes and ensuring personnel are appropriately trained.EUROPE2022US2022 US2022 FOCUS AREAS TO IMPROVE OPERATIONAL DISCIPLINE AND MINIMIZE INCIDENTSIdentify and document the specific key processes such as standard operating procedures,effective communication,training programs,risk assessments,incident reporting systems,and continuous improvement initiatives.Establish key performance indicators for critical elements and processes and evaluate through regular audits,inspections,performance metrics,employee feedback,incident analysis,and benchmarking against industry best practices.Identify gaps,weaknesses,and areas for improvement and prioritize plans to correct these areas.Conduct internal and external audits,management reviews,independent assessments,third-party certifications,and compliance checks against regulatory requirements.Build a strong safety culture that encourages proactive hazard identification,reporting of near misses,and continuous learning and improvement.Robust training programs,competency assessments,job hazard analyses,incident investigations,and lessons learned exercises can all strengthen hazard recognition skills.Regular drills,simulations,and scenario-based training can help build confidence in recognizing hazards in abnormal operating situations.1324LNG line ruptureUS|2022A LNG line ruptured when left blocked for an extended period without a thermal relief path.Investigation identified inadequate procedures,procedures not followed,high overtime rates leading to operator fatigue,and poor alarm management.Refinery fireUS|2022A fire occurred when a light naphtha stream was drained to the refinery oily water system,creating a vapour cloud which ignited.One of the factors leading to the incident was an inadequate response to an abnormal situation.100 largest losses in the hydrocarbon industry10Regulatory interventions can introduce various implications including:Insurance indemnity periodsTwo key factors are increasingly influencing the need to review indemnity periods for business interruption coverage:the intervention of local regulators,and an upswing in global construction activity.Both of these issues have the potential to delay the restart or prolong the rebuild of plant following an incident.ACCESS RESTRICTIONSOnsite teams may have limited access to the area affected by plant damage.In some cases,plant repairs may be prohibited until external investigations are completed and comprehensive plans developed.PERMITTING REQUIREMENTSPermits to operate may need to be reviewed and reissued before plant repairs can commence.Regulators may mandate changes to some plant hardware.ASSURANCE ACTIVITIESIn addition to hardware modifications,regulators will thoroughly evaluate the effectiveness of management systems and operating practices.Interventions from regulators and public authoritiesRegulators are becoming more involved in the aftermath of major incidents at operating sites,particularly those involving serious injuries or fatalities.Notable incidents that have triggered significant regulatory interventions include an explosion at a LNG facility in Texas,US(2022),a fire at a refinery in France(2019),an explosion at a refinery in Germany(2018),and an explosion at a refinery in Wisconsin,US(2018).Increasing rebuild costs and timeframesConstruction activity ramped up post the Covid-19 restrictions but the backlog of projects coupled with high inflation has led to higher costs and longer lead times.Construction cost indices in the ten-year period from 2010 to 2020 recorded average annual increases of 1%to 2.0%.However,prices started to spike from late 2021 as the world emerged from lockdowns,and in 2022 alone,many indices recorded double-digit increases.1001251501752002023202220212020201920182017201620152014201301|Producer price index by industry:new industrial building construction US Bureau of Labor StatisticsData source|US Bureau of Labor StatisticsIndex base adjusted,January 2013=100.100 largest losses in the hydrocarbon industry11Although the rate of increase has decreased in the last year,overall construction costs are still at significantly higher levels.For example,steel prices are at or close to a 10 year high.Increasing construction costs,supply chain constraints,as well as labor and material shortages highlight the importance of carefully evaluating policy indemnity periods and conducting comprehensive reassessments of plant rebuild values to align with prevailing economic conditions.202320222021202020192018201720162015202420141,5001,00050002,0002,50002|NYSE Steel Index,2014-2024 Data source|WSJ Online100 largest losses in the hydrocarbon industry12LOOKING FORWARD MANAGING EMERGING OPERATIONAL RISKSWorkforce and operational excellenceThe scale of investment in energy projects is creating competition for talent as companies strive to secure resources to manage existing operations and new strategic initiatives.The competition for skilled personnel and the migration of talent between industries may pose tangible risks for energy operators.Companies must find ways to manage workforce turnover while maintaining knowledge,competence,and operational excellence to mitigate the inherent hazards involved in building and operating energy assets.Existing energy operators may have a robust safety culture,but ensuring regular reviews of operationally critical processes and procedures is essential.Similarly,new operators should be mindful that building culture and expertise will take time.Operators can improve their chances of preventing significant and avoidable losses by using benchmarking studies,implementing comprehensive training and development programs,ensuring consistent maintenance practices,and regularly testing risk management and response plans.Climate and sustainability considerationsThe reality of climate change means companies have to rethink their infrastructure needs and design.Increasing variability in weather conditions and more frequent natural catastrophe hazards increase the risk exposure of most energy facilities.Operators are challenged with improving the resilience of existing operations today,and elevating climate considerations into expansions or investments.Furthermore,with the increasing scrutiny of environmental,social,and governance policies,future insurance market capacity and risk transfer mechanisms for traditional energy facilities may narrow.DigitalizationCyber risks are escalating with the digitalization of energy systems.A cyberattack on operational technology (OT)such as SCADA applications could paralyze production or power generation.But even the operational management of change associated with OT deployment needs careful planning,process management,and implementation to prevent significant business interruption losses and workforce risk.Geopolitical dynamicsRegional conflicts increase the risk of energy infrastructure been strategically targeted.Aside from increased insurance costs,operators need to be aware of war and other exclusion clauses that may affect insurance coverage.100 largest losses in the hydrocarbon industry134Missed opportunitiesThe consequences of ignoring risk recommendationsAUTHORJenni Morrison,MEng MSc AMIChemE Risk Data Analytics Specialist(Dubai)100 largest losses in the hydrocarbon industry14The energy industry operates on a delicate balance of progress and risk.Major incidents and losses can have far-reaching consequences,some of which could have been prevented had the root cause been addressed.Analyzing,reviewing,and learning from incidents and others experiences can help organizations strengthen their risk management practices and plans.To build and maintain resilient and sustainable operations,organizations need to avoid risk complacency in order to ensure the safety and well-being of their workforce,communities,environment,and their long-term financial viability.The repercussions of ignoring risk recommendations can range from reputational damage to financial loss and,in the worst-case scenario,loss of life.Failure to address identified risks erodes the trust stakeholders place in an organizations ability to operate with integrity and purpose.Risk management practices in the energy and power industry have continued to improve largely driven by structural dynamics such as digitalization and regulation,as well as advanced operational awareness and procedures.But eliminating or at least reducing bias remains one of the most important actions to integrate into operational and strategic risk reviews.Biases often operate subconsciously and can lead to irrational or uninformed decision-making,increasing rather than reducing risk.By understanding the known biases,and uncovering some of the imperceptible ones,companies can develop a culture of awareness,agility,and vigilance.100 largest losses in the hydrocarbon industry15RECURRING THEMES:CULTURE,COST,COMPLIANCESeveral common themes emerge in relation to major loss incidents,primarily relating to process safety management:culture,cost,and compliance.These factors can influence the level of success in learning from past incidents,or in taking action on learnings effectively over time and across multiple sites.Culture is a big factor and sometimes overlooked when assessing risk.Checklists,documented procedures,and technical know-how can be compromised without a mature process safety culture that is woven into the fabric of an organizations psychology.While personal safety is essential,focusing solely on it can lead to a skewed perception of overall safety.For instance,many companies measure process safety performance with personal safety indicators,such as the safe number of hours worked.The US Chemical Safety and Hazard Investigation Board(CSB)found that only measuring personal safety-related KPIs can provide a false sense of safety to organizations,which can inflate their risk tolerance.Or worse,it can breed complacency rather than drive towards building team culture and shared,enterprise-wide,purpose-aligned goals.A common misconception in the energy industry is that the traditional benefit-cost approach may only partially justify investments in reducing exposures to low-probability,high-consequence events.In a risk-based operational environment,it is crucial to strike a balance between financial considerations and the imperative to prevent catastrophic incidents.Alternative approaches,such as real-time monitoring and control systems,that prioritize process safety without solely relying on traditional benefit-cost analyses can provide a more comprehensive evaluation of risk management investments.Beyond financial implications,the reputational damage caused by ignoring risk recommendations can be devastating.Stakeholders including customers,investors,and the public,expect organizations to prioritize safety and responsible practices.Failing to heed risk warnings undermines trust,tarnishes brand image,and can have long-term consequences for business relationships and market standing.Neglecting recognized risks can also lead to regulatory non-compliance and legal violations,including criminal charges in the most extreme cases.The energy industry is highly regulated to promote adherence to safety guidelines designed to protect workers,the environment,and the public.CULTURECOSTCOMPLIANCE100 largest losses in the hydrocarbon industry16Three years before the incident,a process hazard analysis(PHA)identified the risk of popcorn polymer buildup in dead legs.The PHA proposed flushing the lines monthly to prevent any potential accumulation and localized corrosion.The operator did not follow through with the recommendation,due in part to cost concerns.The monthly flushing was considered unwarranted as the risk of polymer build-up was perceived to be low.An investigation by the US Chemical Safety Board(CSB)revealed that ignoring risk recommendations significantly contributed to the explosion.This incident underscores the critical importance of acting on risk recommendations,as seemingly small decisions can have far-reaching consequences.To date,this is the largest marine oil spill in history.Prior to the incident,risk improvement recommendations were identified for the integrity of the wells cementing and the functionality of the blowout preventer.The work was not commissioned due to the significant cost,and the consequences of a failure were grossly underestimated.Risk perception and risk tolerance highlight the need for a balanced approach to decision-making and budgeting that considers short-term gains and long-term safety implications.The Piper Alpha incident remains the costliest recorded property damage loss,and with 165 fatalities,one of the most devastating in terms of loss of life.An audit before the explosion had identified shortcomings in maintenance and safety procedures on the rig.The audit recommended the installation of a valve to isolate a specific section of the pipeline in the event of a fire,and the implementation of a lockout tagout(LOTO)procedure.The recommendations were not actioned.In 2017,a similar root cause led to a major loss in the UAE.This incident was linked to a lack of proper control of isolation,a lesson and engineering requirement that could have been applied after Piper Alpha.A risk assessment had indicated significant deficiencies in the depots overfill prevention systems.No action was taken,and a massive explosion led to extensive damage to the depot,nearby properties,and the environment.The American Petroleum Institute(API)made changes to the Tank Overfill Prevention Standard,API 2350,which outlines best practices for preventing tank overfills in petroleum facilities.Despite this,some companies may not have yet applied the necessary overfilling protection hardware and system measures.INACTION LEADS TO HISTORY REPEATING ITSELFThe 100 largest losses detailed in this report illustrate that lessons from prior incident investigations did not always spark action and better prevention steps.Some of the most significant risk management themes for the energy industry are evidenced in a few examples below.Piper Alpha oil rig explosionJuly 1988Buncefield oil depot explosion December 2005Deepwater Horizon oil spillApril 2010Port Neches explosion and fireNovember 2019100 largest losses in the hydrocarbon industry17REFLECTIONSHistory has demonstrated that the industry can continue to improve its efforts at addressing recognized hazards and proactively implementing risk improvement recommendations.The key takeaways from these incidents are clear:Prompt action:Operators must address known risks without delay,and risk improvement recommendations should be implemented as soon as practical to mitigate potential hazards.Effective communication:Clear communication among stakeholders,including risk engineers,operational personnel,and management,is essential to ensure that identified risks are effectively understood and actioned.Compliance and oversight:Regulatory compliance and rigorous change management oversight are necessary to implement risk improvement recommendations and promote the safety and integrity of operations.Continuous improvement:A culture of continuous improvement,aligned to shared goals should be fostered within an organization-and across the energy industry-encouraging regular review and reassessment of risk management practices.By investigating and learning from operational incidents,organizations can strengthen risk management practices,minimize losses,protect the environment,and safeguard the well-being of people and property.Through a collective commitment to proactive risk management the industry as a whole can become more resilient.100 largest losses in the hydrocarbon industry185From climate risk,to climate resilience and adaptationClimate-induced losses are already material events forcing organizations to develop new strategies and adapt business models to protect their assets and balance sheets.For instance,in the US there were 376 confirmed weather/climate disaster events with insured losses exceeding US$1 billion between 1980 2023.Extreme weather and natural disasters including hurricanes,droughts,floods,and heatwaves can lead to injury and death,property damage,supply chain disruptions,reputational damage,and more.Business leaders across many industries now consider natural disasters as one of the top five risks globally,according to the World Economic Forums Global Risks Report 2024.AUTHORErnest EngRegional Specialty Leader Marsh Advisory,and Head of Analytics,IMEA100 largest losses in the hydrocarbon industry19For the energy industry,climate vulnerability is especially relevant for certain asset classes where building codes may be insufficient given the rising exposure to extreme events.Energy infrastructure is often not designed to withstand more frequent and intense weather extremes,either because of its age,or due to its function.This is one of the driving factors behind the cost multiplication of climate-related losses.Geographical variations in weather patterns add another layer of complexity for multi-site/multinational operators who may have assets exposed to heat stress and coastal flooding/inundation in the Middle East,versus tropical cyclones in Asia or Australia.Companies with direct and indirect exposures in vulnerable regions may experience higher credit and market risks,as well as increased underwriting scrutiny,which can affect operational expenses and profitability.The reality of climate change means companies have to rethink their infrastructure needs and design.As energy systems become more complex with the integration of different types of technology,infrastructure resilience is no longer only about returning single assets to full operation after a disruptive event.When interdependent parts of a system are affected,the system as a whole is at risk.Incidents such as the recent wildfires in Canada illustrate that restarting the energy system can be delayed by days,possibly weeks,if critical system parts cannot be restarted autonomously.Proactive risk management may also mean that companies have to invest in additional infrastructure,such as backup systems and flood defense infrastructure.19802023198219841986198819901992199419961998200020022004200620082010201220142016201820200284812162024Number of events$0$600$100$200$300$400$500Cost in billions(US$)Combined disaster costFreeze countWinter storm countFlooding countDrought countWildfire countCosts 95%CISevere storm count5-year avg costsTropical cyclone count03|US billion-dollar disaster events 1980-2023 CPI adjustedData source|National Oceanic and Atmospheric Administration100 largest losses in the hydrocarbon industry20EVIDENCE AND IMPACT EXTREME WEATHER AND NATURAL CATASTROPHESThe number of extreme weather events recorded each year have risen by a factor of five over the past 50 years.The US Energy Information Administration estimates that a high-impact hurricane could result in a temporary loss of monthly offshore crude oil production of about 1.5 million barrels per day(b/d)and a nearly equivalent temporary loss of refining capacity.And Marsh McLennans Flood Risk Index shows that 23%of the worlds power generation capacity is currently threatened by flooding,with exposure expected to increase to 37%,41%,and 48%under the 1.5 C,2 C,and 3.5 C temperature increase scenarios.Changes in the intensity and frequency of extreme weather events,as well as seasonal deviations from average weather conditions,affect current and future energy infrastructure,jeopardizing energy security and reliability.Potential impacts on energy systems include blackouts,shutdown of nuclear and thermal power plants due to extended heatwaves or droughts,and changing rainfall patterns affecting hydropower generation.In a recent survey,extreme weather events ranked among energy leaders top uncertainty issues in the US and in parts of Asia Pacific,Latin America,and Africa.Facilities and infrastructure are typically designed for the expected weather conditions where they are situated,which partly explains why the impact of atypical and extreme weather events can be pronounced.Consider,for example,cold weather conditions in Texas in 2021 that led to plant shutdowns,or heatwaves in Europe that led to supply constraints.Organizations that understand these risks and deploy resilient and adaptable infrastructure design will be best placed to reduce the potential impact of extreme weather losses.23%of the worlds power generation capacity is currently threatened by flooding.Climate risk assessments can inform investment and operational strategyClimate risk assessment scenarios can be challenging due to the unpredictability of weather events and the potential correlation of impacts on the global economy from factors such as involuntary migration,changing land use,and increased urbanization.Nevertheless,given the significance of climate risks and increased disclosures to stakeholders and regulators,these assessments are becoming mainstream as quantification methodologies and access to data supported by academic research continue to improve.A key priority should be to gain a clear understanding of current and future climate risk as a basis for developing engineering and financial resilience and adaptation plans to provide confidence to all stakeholders including investors,customers,and regulators.To aid preparedness to respond to potential climate induced losses,Marsh uses a three-step process to analyze the risk and resilience of three primary dimensions hardware,software,and emergency response.CLIMATE IMPACT ASSESSMENTReferencing the climate modeling output and findings from the site survey,the impact on climate at the site is assessed.This considers climate change predictions and the potential damage and disruption that could occur over different timeframes.To supplement the climate impact assessment,a review of management procedures related to climate risk,emergency response plans,and records of weather-driven events is undertaken.CLIMATE ADAPTATION RECOMMENDATIONConsidering the climate risk in light of any existing resilience measures,recommendations for further resilience measures are provided along with the recommended timing to offset future risk.CLIMATE RISK IDENTIFICATIONUsing established climate models,climate risk at the site is assessed.This identifies climate risks that could present at the location over an extended timescale.The risk is also assessed across different climate warming scenarios.An in-person survey is undertaken to identify the features of the site,its operation,and existing levels of climate resilience.132Physical assets and infrastructure located at the site.100 largest losses in the hydrocarbon industry21HardwareTechnology,processes,and people that manage operations.SoftwareSystems and plans to mitigate impact of a climate-related event.Emergency response100 largest losses in the hydrocarbon industry22Everything to play forThe energy transition offers the opportunity to develop a more robust and resilient energy industry.The evolving risk landscape presents new demands for operators,including new regulations and growing scrutiny from investors and other stakeholders.Climate change and the increasing risk of weather-related losses represent an enterprise-wide risk with implications for operations,supply chains,environmental obligations,corporate reputation,and more.To mitigate weather-related losses,organizations are increasingly conducting sophisticated climate risk assessments to evaluate the scale,nature,and complexity of their exposures.Increasing the resilience of energy infrastructure to safeguard against extreme weather events is no longer optional it is now a necessity.Energy systems must be smarter,not just stronger;and now is the time for energy leaders globally to focus on aiming to future-proof the assets that power our world.100 largest losses in the hydrocarbon industry236When business as usual is interruptedFollowing a property damage event,the amount of the financial loss from disrupted business operations can sometimes exceed the cost of repairing the physical damage to the facility.Organizations should seek a clear understanding of their vulnerabilities and the factors that can impact them in order to mitigate potential risks.AUTHORRachel RamskillIMEA Business Interruption&Emerging Risks Leader100 largest losses in the hydrocarbon industry24Energy facilities are subject to a variety of factors that can disrupt business operations and impact continuity;integrated supply chains can compound the disruption or create a domino effect.Operational disruption can stem from physical damage to assets due to process safety incidents,cyberattacks,supply chain failure,or volatile and severe weather.Standard business interruption(BI)coverage included in first-party property policies may not address the unique needs of energy and power operations.Given the diverse range of use cases in this industry,it is impossible to adopt a one-size-fits-all approach.The rapid expansion of the renewable energy sector,the growing interdependencies among multi-site facilities,and the various contractual arrangements within integrated supply chains have led policyholders to adopt different approaches to pursuing and purchasing BI coverage.Operators should be prepared to assess and then re-assess their BI risks and exposures,and revisit their approach to BI coverage accordingly.BI coverage included within property policies is designed to compensate a business for financial loss following property damage or machinery breakdown.Policies can be structured to protect gross profit or fixed costs and debt servicing,and often contemplate unplanned increases in operating expenses,such as the cost of using temporary facilities or importing feedstock to maintain operations.Considering the mechanisms of BI coverage in light of an organizations actual commercial agreements is an important step in evaluating the level of coverage and how any future BI claim may be treated.While historical and projected data,beyond standard accounting metrics,are foundational,BI calculations should also take account of the coverage terms and basis for recovery.Some organizations discover during the claims process that the insured values differ meaningfully from the basis used by accounting teams for budgeting and forecasting.An organizations risk professionals should aim to confirm that the organizations commercial and regulatory arrangements are likely to be satisfied based on the accounting standards,metrics,and calculations contemplated in the BI coverage.Another important confirmation point is that the organization has the necessary information,systems,and capabilities to prepare loss data based on the BI coverage purchased.100 largest losses in the hydrocarbon industry25KEY FACTORS TO CONSIDER FOR BI EXPOSURESEquipment shortages and lead times can significantly impact operationsHigh inflation,coupled with supply chain delays and material shortages,can lead to prolonged reinstatement times.For example,recent delays in securing steel pipes and casing for drilling have limited production in the US.It is important to review the length of indemnity periods and identify any potential impacts of underinsurance.Changing business models are driving optimization and profitabilityIntegrated value chains and consolidated assets can help drive optimization and improve profitability.Energy transition is likely to see the trend for consolidating assets as operators rationalize the least profitable and redundant infrastructure.For example,offshore oil and gas assets that have reached the end of their commercial life for producing hydrocarbons may be repurposed to be part of a carbon capture transport and storage network.However,integrating and consolidating actions can introduce a new layer of contingent BI exposures.An increased dependency on fewer facilities could mean that any disruption may have broader consequences beyond the location of the physical damage.For instance,if one location experiences an unplanned outage,it could result in economic losses across the entire value chain.While a leaner operational strategy may improve margin,unplanned issues could potentially offset any gains.BI losses could be greater than expected if appropriate consideration is not given as to how an event could affect interdependent value and supply chains.Protecting the value of growthRecent higher commodity prices have boosted balance sheets,but the value of that growth may not be fully protected by existing BI coverage.The variability of markets,together with regulatory and geopolitical dynamics can make it difficult to accurately forecast operating margins.Insurance policies are often based on forecasts made several months before a policy is renewed.Including a BI coverage clause that aims to allow for a level of volatility in values may be helpful but organizations should aim to update and/or maintain the accuracy of values declared throughout the life of the policy that includes BI coverage.Risk exposures in the energy and power industry are some of the most challenging to identify,assess,manage,and mitigate.The resilience of an organization to BI risk needs to be continually assessed as operational and commercial arrangements evolve.Stress testing BI coverage against a range of credible loss scenarios can assist in building confidence that the coverage mechanism responds appropriately,and conducting business interruption reviews provides an opportunity to realign to prevailing business conditions.Changes that could increase BI exposureMarket conditions that significantly impact insured values e.g.increase in gross profit.Contractual obligations affected in a loss situation.Changes in operations that could introduce critical node(single point of failure).Changes in customer or supplier profile that may create contingent BI risks.Prolonged reinstatement periods that may impact the length of the indemnity period.12345100 largest losses in the hydrocarbon industry267Managing risks in energy constructionThe construction phase of energy projects introduces unique risks and challenges that,if not properly managed,can lead to substantial financial losses for project owners,contractors,and insurers alike.This article explores some common risks,and prevention measures to mitigate losses and improve overall project outcomes.Relevance of construction lossesConstruction losses in the energy industry impact all parties involved in the project.From delays and cost overruns to accidents and equipment failures,construction losses can significantly affect project timelines,budgets,and ultimately,operational success.By analyzing these losses,the construction,energy,and risk industries gain invaluable insights to strengthen risk management practices,enhance safety protocols,and improve project planning and execution.Valuable insights and lessons are everywhereEvery project is another opportunity to learn,evolve,and improve.But for that to happen,project stakeholders must be prepared to constructively evaluate and share the learnings across the industry.Here are the four common themes that energy operators and their construction contractors should focus on to improve the likelihood of project success.AUTHORDal BhattiConstruction Practice Leader IMEA100 largest losses in the hydrocarbon industry27Risk assessmentRisk assessment and management practices during the planning,design,and construction stages are constantly evolving.While insurers and risk engineers have a tendency to focus on the worst case scenarios,sharing learnings about the practical elements of a build may aid decision making for construction contractors.For example,if construction is in a location thats susceptible to both windstorm and flood,should items be tethered down to prevent them being blown away or is it more beneficial for them to be portable?If they arent tethered,are they more prone to theft?Timing can alter loss scenarios dramatically,and every action has a consequence.Project managementConstruction losses often result from inadequate supervision,poor coordination,or communication gaps among various stakeholders.Implementing robust project management practices,employing experienced personnel,and fostering a culture of collaboration can minimize the occurrence of losses.A recent hydroelectric project in South America provides a good example of the importance of stakeholder management and the need to be agile.The project was divided into several work sites and contractual portions.At the start of work,the project manager of one portion spent a significant,unbudgeted amount on aggregate to improve the site roads within his remit.The decision and overspend were initially criticized by senior management but that work parcel was completed on time and on budget.Without sharing of information between the various contractual portions,lessons were unable to be learnt across the entirety of the project.Other portions of the project experienced significant delays and cost overruns because laden trucks couldnt manoeuver around their sites.Equipment failureCritical equipment failures during construction could jeopardize the whole project,causing significant delays and cost overruns.While these types of incidents may happen without warning,they highlight the importance for contractors to have rigorous quality control protocols in place and complete thorough testing on all equipment.Implementing strict adherence to industry standards,regular inspections,and comprehensive maintenance programs can help prevent similar equipment failures and subsequent claims resulting from physical damage and loss of revenue due to the inevitable project delays.Construction accidentsA primary cause of major accidents is the failure to implement or adhere to critical safety protocols such as hot works permits or lifting of heavy equipment.Poor safety practices can result in injuries to workers,damage to the project and surrounding site,and potential damage to the environment.These incidents emphasize the need for robust safety training,adherence to regulatory guidelines,and continuous monitoring of safety practices throughout the construction phase.Implementing a strong safety culture,regular audits,and comprehensive emergency response plans can significantly reduce the likelihood and severity of construction accidents and associated losses.100 largest losses in the hydrocarbon industry28LOSS PREVENTION MEASURESEffective project managementEmploy experienced project managers and ensure proper coordination,communication,and oversight across all stakeholders.Quality controlImplement stringent quality control measures,adhere to industry standards,conduct regular inspections and rigorous testing of equipment and materials.Comprehensive risk assessmentConduct thorough risk assessments prior to project inception as well as during the construction phase,identify and evaluate potential risks throughout and deploy mitigation measures.Safety protocolsEstablish and enforce robust safety protocols,provide comprehensive training to workers,and follow regulatory and industry guidelines.Construction related losses can impact the operational success of projects as well as insurer perception and confidence.Learning from past incidents,recognizing common themes,and implementing preventive measures,are pivotal in addressing potential risks and improving project outcomes.100 largest losses in the hydrocarbon industry298100 largest losses graphical data100 largest losses in the hydrocarbon industry3004|100 largest losses by year and sectorUpstream Terminals and distribution RefiningPetrochemicalGas processing197419751976197719781979198019811982198319841985198619871988198919901991199219931994199519961997199819992000200120022003200420052006200720082009201020112012201320142015201620172018201920202021202220235000400030002000100006000US$millionsUpstream Terminals and distribution RefiningPetrochemicalGas processingAsia PacificEuropeUS&CanadaLatin AmericaMiddle East&Africa10,65020,25716,2843,9601,8193532762013,9286,34619,5796,3336,783402413111205|Value of incidents by sector(US$million)07|Value of incidents by region(US$million)08|Distributionof incidentsby region(number)06|Number ofincidentsby sectorBlowoutCollisionExplosionFireFire&explosionMechanical failureNatural catastrophe09|Property damage by cause of loss(US$million)5,42912,3694,11516,0182,3408,1173,383100 largest losses in the hydrocarbon industry31100 largest losses in the hydrocarbon industry 1879Pasadena,Texas,US#22430Piper Alpha,North Sea,UK#1 1113Baker,Gulf of Mexico,US#4 1053Roncador Field,Campos Basin,Brazil#6823Norco,Louisiana,US#16 858Henderson,Nevada,US823Bay of Campeche,Mexico#15798Macondo,Gulf of Mexico,US#201092Ekofisk,North Sea,Norway#5 906Toulouse,France#10 943Enchova,Campos Basin,Brazil896Vohburg,Germany#11 818Jubilee Field,Ghana#17#12892Mina Al-Ahmadi,Kuwait857Skikda,Algeria#14 1007Longford,Victoria,Australia#7#9931Jiangsu,China804Sendai,Japan#19Upstream RefiningPetrochemicalGas processingFire&explosionFireMechanical failureBlowoutNatural catastropheCollisionExplosion#31200Abu Dhabi,UAE807Cook Inlet,Alaska,US#18#13#810|20 largest losses Adjusted property loss value at December 31,2023(US$million)32100 largest losses in the hydrocarbon industry339Details of the 100 largest losses by sector34 GAS PROCESSING38 PETROCHEMICALS48 UPSTREAM61 REFINING77 TERMINALS AND DISTIBUTION100 largest losses in the hydrocarbon industry34Gas processingSeven property damage losses associated with gas processing feature among the 100 largest losses.There was one new gas processing incident in Oklahoma,US in July 2022 that was of sufficient value to qualify for this edition.Another explosion at a liquefied natural gas(LNG)facility in the US in June 2022 doesnt make the top 100 list but reinforces the critical role that robust engineering and design play in ensuring the integrity of LNG facilities.The exact cause of the loss is still under investigation,but initial reports suggest that it may have been triggered by a failure in the facilitys containment system.The complexity of gas processing facilities,coupled with the high value of the assets involved,necessitates a comprehensive approach to risk management and safety.11|Gas processing losses19741975197619771978197919801981198219831984198519861987198819891990199119921993199419951996199719981999200020012002200320042005200620072008200920102011201220132014201520162017201820192020202120222023100080060040020012000YearLoss value(US$million)100 largest losses in the hydrocarbon industry35GAS PROCESSINGGas supplies to Australias Victoria state were disrupted when an explosion and fire occurred at a gas processing plant.The cause of the incident was traced back to a heat exchanger rupture triggered by the abrupt shutdown of hot oil pumps that led to a process upset.The cessation of hot oil supply and cold oil exposure caused chilling in some vessels.When hot oil was re-introduced to the heat exchanger,it ruptured from a brittle fracture.An initial release of approximately 22,000 pounds(lb)of hydrocarbon vapor exploded,and an estimated 26,000 lb burnt as a jet fire that lasted for almost two and a half days.The incident highlighted how a combination of ineffective management procedures,staffing oversights,communication problems,inadequate hazard assessment,and training shortfalls combined to result in a major malfunction and tragic loss of life.Longford,Victoria,Australia25/09/1998#07Adjusted property loss value 2023(US$million)Original property loss value(US$million)EXPLOSIONAn explosion at an LNG plant resulted in 27 fatalities,72 injuries,and seven individuals reported as missing.It destroyed three liquefaction trains,damaged a nearby power plant,and necessitated the shutdown of a 335,000 bbl/d refinery.Neighboring industrial facilities were also affected.Initially attributed to a faulty boiler,subsequent investigations revealed a large hydrocarbon release from a cold-box exchanger that ignited upon entering the boiler.LNG complex trains 5,6,and 10 restarted in May and September 2004.However,trains 20,30,and 40 were destroyed in the incident,representing 50%of the LNG complexs capacity.Skikda,Algeria 19/01/2004#14EXPLOSION4431007470857100 largest losses in the hydrocarbon industry36GAS PROCESSINGFIRE AND EXPLOSIONAn explosion and subsequent fire occurred at a gas-to-liquids(GTL)plant,with the fire brought under control the following day.The plant was one of only two commercially viable GTL facilities globally,capable of producing 12,500 bbl/d of middle distillates and waxes from natural gas feedstocks.The explosion occurred in the air separation unit(ASU),which provided oxygen for the synthesis gas feedstock production.Investigations pinpointed an initial combustion event in the ASU as the most likely cause.This event is believed to have initiated the explosive burning of aluminum heat exchanger elements in the presence of liquid oxygen,resulting in an explosive rupture.The incident caused twelve injuries and the plant remained shut for several months to facilitate repairs.Bintulu,Sarawak,Malaysia25/12/1997#23Adjusted property loss value 2023(US$million)Original property loss value(US$million)A fire erupted at a natural gas liquids(NGL)fractionation facility,resulting in substantial damage to the plant and significant loss of production.Temporary evacuation of local residents was taken as a precautionary measure.The root cause of the fire at the facility is currently under investigation.Medford,Oklahoma,US09/07/2022#44FIREA magnitude 7.5 earthquake struck Komo with multiple aftershocks over the following weeks.The event caused significant building and infrastructure damage,and more than 100 people died.The damage affected the local airport,a gas conditioning plant which was safely shut down with some damage but no loss of containment and the associated pipeline system,where there was no loss of containment but a need to remediate the pipeline“right of way”along most of its onshore length.Note:The value quoted here relates to the reserve across all elements of the loss,including the gas plant and the associated pipeline.Komo,Papua New Guinea26/02/2018#54NATURAL CATASTROPHE285655425425335390100 largest losses in the hydrocarbon industry37GAS PROCESSINGA sequence of explosions rocked a gas processing complex,stemming from a vapor cloud explosion in cryogenic unit no.2,followed by two more blasts in cryogenic unit no.1.The latter suffered significant damage,including the destruction of its control rooms and extensive damage to the liquefied petroleum gas(LPG)product pumps.The incident originated during maintenance work on one of the pumps in cryogenic unit no.1,where a seal leak was found and addressed.However,an ensuing LPG product leak led to a vapor cloud that ignited and triggered the initial explosion,resulting in extensive damage and disrupting a substantial portion of Mexicos gas processing capacity.Firefighters managed to quell the fires after around three hours.Cactus,Reforma,Chiapas,Mexico26/07/1996#71EXPLOSIONDuring a scheduled restart at the facility,a fire occurred within the filter housing of a gas turbine generator.An investigation determined that the primary cause was“autoignition in the filters in the turbines air inlets,”resulting from using the anti-icing heat exchanger in the air inlet beyond its intended scope,which led to elevated temperatures and ignited the fire.No injuries were reported,and the facility has since recommenced operations.Hammerfest,Norway28/09/2020#81FIREAdjusted property loss value 2023(US$million)Original property loss value(US$million)137322300306Petrochemicals100 largest losses in the hydrocarbon industry38There have been no new petrochemical incidents added to the dataset in the last two years.However,there was a notable explosion and fire on a glycol unit in Louisiana,US in July 2023.Petrochemical losses can be exceptionally large due to several factors.The concentration of high-value equipment and machinery within these facilities,and the large volumes of highly flammable or hazardous materials means that any damage or failure can result in significant property damage losses.Additionally,the interconnectedness of petrochemical supply chains means that disruptions in one facility can create a ripple effect throughout the industry,impacting production,distribution,and pricing on a global scale.19741975197619771978197919801981198219831984198519861987198819891990199119921993199419951996199719981999200020012002200320042005200620072008200920102011201220132014201520162017201820192020202120222023Year1000800600400200120001400160018002000Loss value(US$million)12|Petrochemical losses100 largest losses in the hydrocarbon industry39PETROCHEMICALSEthylene and isobutane were inadvertently released from a high-density polyethylene(HDPE)unit at the chemical complex.Approximately 60 seconds later,the released gases ignited and caused an explosion.The explosion led to the destruction of two HDPE units,which encompassed eight particle-form,loop reactor trains.The explosions heat caused boiling liquid expanding vapor explosions in nearby pressurized storage tanks.Other process units at the chemical complex suffered minimal damage and resumed standard operations within a few weeks.The accident investigation established lapses in maintenance procedures,including that the single isolating ball valve was open at the time of the gas release.Pasadena,Texas,US23/10/1989#02EXPLOSIONAn explosion occurred at a fertilizer and pesticide production chemical plant located in an industrial park.The blast caused significant damage to surrounding factories and offices.Windows up to six kilometers(km)away were shattered and another chemical factorys roof(approximately 3km away)collapsed.The explosion registered as a 2.2 magnitude seismic shock,necessitating the deployment of more than 900 firefighters to control the ensuing fires.According to Chinas Ministry of Emergency Management,the incident was caused by the long-term illicit storage of nitrated waste in the on-site solid waste warehouse.It is understood that nearly 80 people were killed and over 600 people injured as a result of the incident.Chenjiagang Chemical Industry Park,Jiangsu,China21/03/2019#09EXPLOSIONAdjusted property loss value 2023(US$million)Original property loss value(US$million)6751879800931100 largest losses in the hydrocarbon industry40PETROCHEMICALSAn explosion occurred at a fertilizer plant near Toulouse,France.The facility stored approximately 300 tons of off-specification ammonium nitrate crystals.The explosion had the strength of a 3.4 magnitude earthquake,and caused extensive damage to the plant and surrounding areas.Thirty people were killed in the blast and approximately 3,000 people were injured.The incident highlighted the importance of proper handling and storage procedures for hazardous materials to help prevent such disasters.Toulouse,France21/09/2001#10EXPLOSIONAn explosion occurred at a plant producing ammonium perchlorate(AP)for rocket fuel.The incident resulted in the flattening of the local industrial park,creating a crater 125 meters wide and damaging walls up to 15 miles away.Two fatalities were reported.The cause was related to a fire in a batch dryer.The initial explosion had a force equivalent to 108 tons of TNT,with a subsequent explosion four minutes later equivalent to 235 tons of TNT.Roughly half of the buildings in the nearby town of Henderson were destroyed.A natural gas pipeline running under the plant was ruptured in the event and burned for a week.Henderson,Nevada,US04/05/1988#13EXPLOSIONAdjusted property loss value 2023(US$million)Original property loss value(US$million)430906300858100 largest losses in the hydrocarbon industry41PETROCHEMICALSDuring a startup procedure,an explosion occurred in an air line connected to a reactor.The reactor was designated for the liquid phase oxidation of butane.The explosion ruptured the external section of the air line,causing the reactors contents to vaporize and form a hazardous cloud.The vapor cloud ignited approximately 25 to 30 seconds after the initial release.The explosion resulted in substantial property damage within the immediate vicinity and considerably impacted the entire site,with reports of broken windows up to seven miles away.The primary cause was believed to be inadequate purging of the reactor during a prior shutdown.Pampa,Texas,US14/11/1987#25EXPLOSIONAn explosion in the ammonium nitrate process area led to the destruction of the seven-story main process building and the creation of a 30-foot diameter crater.During the explosion,metal fragments punctured one of the plants two 15,000-ton refrigerated ammonia storage tanks,releasing approximately 5,700 tons of ammonia.The event necessitated the evacuation of around 2,500 people in the vicinity.Additionally,metal fragments struck a nitric acid tank,causing the release of approximately 100 tons of nitric acid.The force of the explosion also ripped metal siding from nearby buildings,damaged three third-party electric generating stations,shattered windows in buildings located 16 miles away in Sioux City,and was felt more than 30 miles away.Port Neal,Iowa,US13/12/1994#38EXPLOSIONAdjusted property loss value 2023(US$million)Original property loss value(US$million)215639203501100 largest losses in the hydrocarbon industry42PETROCHEMICALSAn abnormal chemical reaction occurred during the batch production of a thermoplastic rubber product,resulting in an explosion.The event led to the destruction of the reactor,process controls,associated equipment,control room,and the facility dedicated to the production unit.The ensuing fire spread to affect a section of the tank farm,causing extensive damage to five atmospheric storage tanks.The crisis escalated when the first of four 1,000,000-US-gallon and one 500,000-US-gallon styrene storage tanks erupted.In response,firefighting teams employed a combination of cooling water and foam hose streams to prevent the fire from spreading to other nearby storage tanks,notably two containing highly flammable butadiene.The fire was brought under control after approximately nine hours.Belpre,Ohio,US27/05/1994#42EXPLOSIONApproximately 6,000 US gallons(about 30,000 lb)of liquid butadiene were released after a pipe rupture in the final fractionation section of the 1,3-butadiene production unit.This release subsequently vaporized and ignited,leading to multiple fires and explosions at the facility,causing three injuries.The US Chemical Safety and Hazard Investigation Board(CSB)determined that the inadequate management of popcorn polymer in a dead leg of piping caused the incident.Popcorn polymer,a sticky substance,accumulated within the dead leg,ultimately building enough pressure to rupture the piping and release flammable butadiene that quickly ignited.The investigation revealed a failure to properly manage the hazard,and resulted in safety recommendations and regulatory changes.Port Neches,Texas,US27/11/2019#47EXPLOSIONAdjusted property loss value 2023(US$million)Original property loss value(US$million)182449380442View CSB investigation video100 largest losses in the hydrocarbon industry43PETROCHEMICALSA fire broke out at a titanium dioxide manufacturing facility,leading to substantial damage at the plant and a halt in pigment production.The incident is believed to have originated in the electrostatic precipitator and rapidly spread to the pipe network and manufacturing halls.Pori,Finland30/01/2017#52An explosion occurred at a styrene monomer production complex during the start-up phase after routine maintenance.The initial explosion happened in a reactor,fragmenting shrapnel widely and causing a more powerful explosion in a second reactor during a shift changeover.Subsequently,a fire broke out.The flash vessels experienced ductile overloads due to excessive internal pressure generated by an uncontrolled catalytic reaction.North Brabant,Netherlands03/06/2014#53EXPLOSIONFIRE AND EXPLOSIONAdjusted property loss value 2023(US$million)Original property loss value(US$million)An accident occurred at a methylcellulose manufacturing facility,involving an initial explosion and subsequent fire that was extinguished after approximately seven hours.Of the individuals working on-site,17 sustained injuries;three were classified as critical,five as serious,and nine with minor injuries.Additionally,one off-site minor injury was reported.Static electricity likely ignited the incident,culminating in a powder dust explosion.As a result,all methylcellulose operations were halted for two months before gradually resuming.Niigata,Japan20/03/2007#55EXPLOSION325397302396240379100 largest losses in the hydrocarbon industry44100 largest losses 44PETROCHEMICALSA large vapor cloud explosion caused extensive damage to a chemical facility,resulting in the loss of 28 lives and 36 others injured.The incident happened at the weekend when the main office block was unoccupied.Eighteen of the fatalities occurred in the control room as a result of windows shattering and the roof collapsing.Offsite,53 individuals reported injuries,and properties in the vicinity experienced varying degrees of damage.Before the incident,a reactor was removed,and a bypass assembly was installed to maintain production.This 20-inch bypass system ruptured,possibly triggered by a nearby fire on an eight-inch pipe.The rupture led to the release of 30 tons of hot cyclohexane,forming a flammable cloud that found an ignition source.Subsequent fires continued to burn over three days.Flixborough,UK01/06/1974#56EXPLOSIONAdjusted property loss value 2023(US$million)Original property loss value(US$million)An explosion and fire resulted in significant damage at a low-density polyethylene plant.The incident occurred due to a high-pressure ethylene leak,caused by the fatigue failure of a vent connection on the compressors suction side.The event led to six fatalities and 13 injuries.Antwerp,Belgium02/10/1975#61MECHANICAL FAILUREA hexane release led to the ignition of a vapor cloud when it encountered an electric motor,resulting in an explosion.The incident caused damage to a process unit and 20 injuries.One firefighter was killed,and another was seriously injured while fighting the blaze.Munchmuster,Germany10/12/2005#63EXPLOSION5836660347200347100 largest losses in the hydrocarbon industry45100 largest losses 45PETROCHEMICALSA shelter-in-place directive was issued when a fire broke out following an explosion in the propylene refrigeration section of an ethylene unit.The fire,which burned for three days,forced the facilitys shutdown for six months but caused no deaths or serious injuries.Port Arthur,Texas,US29/04/2006#68EXPLOSIONAdjusted property loss value 2023(US$million)Original property loss value(US$million)Severe floods along the San Jacinto River in Texas resulted in the shutdown of a major industrial site.The complex comprised facilities that produced 650,000 tons per year of ethylene,200,000 tons per year of LLDPE,and 280,000 tons per year of LDPE,in addition to general utilities.The widespread floods impacted the site and disrupted downstream clients who depended on these utilities.The floodwaters breached protective dikes surrounding the main substation,leading to the inundation of control rooms and offices causing extensive operational disruptions.Cedar Bayou,Texas,US20/10/1994#72NATURAL CATASTROPHEAn incident unfolded as workers prepared to inspect a compressor in the nitroparaffin unit.They discovered a small fire and promptly activated the plants fire alarm system.In approximately 30 seconds,a substantial explosion occurred,followed by a series of smaller explosions.The initial blasts impact extended as far as eight miles away,destroying an area within the plant roughly the size of a city block.Fires ignited in the aftermath and persisted for over seven hours.While the incident didnt harm the two on-site ammonia units,the entire plant was temporarily shut down.Sterlington,Louisiana,US01/05/1991#73FIRE AND EXPLOSION120319130321200332100 largest losses in the hydrocarbon industry46PETROCHEMICALSA petrochemical plant was rocked by a substantial explosion and a subsequent large fire.The explosion reverberated over a 10-mile radius while the ensuing fire burned for roughly ten hours.The incident caused significant damage to the plant and several workers sustained minor injuries.The surrounding area and property were also affected,leading to temporary road closures.Local residents were advised to remain indoors to prevent exposure to potentially harmful substances.The event was traced back to a cracked gas compressor system in the Olefins unit.It was initiated by the structural failure of a 36-inch pneumatically-assisted,non-return valve on a high-pressure light hydrocarbon gas line.The escaping gas formed a vapor cloud,which eventually encountered a source of ignition,culminating in an unconfined vapor cloud explosion.Deer Park,Texas,US22/06/1997#77An explosion occurred at a plastics plant producing 200 million barrels of specialty-grade PVC per year.The explosion,which could be felt eight kilometers away,took place in a reactor where vinyl chloride and vinyl acetate were mixed.Up to 75%of the plant was destroyed in the incident,resulting in two serious injuries and the loss of five lives.Illiopolis,Illinois,US23/04/2004#89FIRE AND EXPLOSIONMECHANICAL FAILURE135310150274Adjusted property loss value 2023(US$million)Original property loss value(US$million)View CSB investigation video100 largest losses in the hydrocarbon industry47PETROCHEMICALSA gas leak involving a pipe rack that ran to a terminal in the petrochemical complex led to an explosion near the complexs chemical plant.This caused additional damage to the pipe rack and resulted in a major gas leak.A powerful second explosion occurred,which could be felt more than 15 miles from the complex.This second explosion and the subsequent fire destroyed the chemical plant,damaged the pipe rack,and caused moderate damage to other complex buildings and adjacent third-party facilities.The fire was extinguished after approximately three hours.The complex was completely shut down for seven months to allow for the reconstruction of the plant and pipe rack.Pajaritos,Coatzacoalcos,Mexico11/03/1991#93Adjusted property loss value 2023(US$million)Original property loss value(US$million)MECHANICAL FAILURE97258Upstream100 largest losses in the hydrocarbon industry48There are 32 upstream sector losses in the top 100,including the latest incident which occurred in July 2023 in the Gulf of Mexico.Nine historical losses have also been added to this edition following a review of updated loss data from insurance markets.In this dataset,the upstream sector accounts for the highest cumulative losses,US$20.25 billion.Various factors contribute to the cost of upstream losses,including the remoteness of offshore facilities which presents challenges for emergency response and recovery measures.13|Upstream losses1974197519761977197819791980198119821983198419851986198719881989199019911992199319941995199619971998199920002001200220032004200520062007200820092010201120122013201420152016201720182019202020212022202320002500150010005003000035004000Loss value(US$million)Year100 largest losses in the hydrocarbon industry49UPSTREAMA pressure relief valve was removed for maintenance,causing pressurization of a piping section,which led to the release and ignition of gas condensate in the platforms gas compression module.The event initiated a chain of fires and explosions,resulting in substantial facility damage.The accidents severity was compounded by ruptured pipelines,which released oil and gas,and the subsequent disabling of most emergency systems.The gas compression modules proximity to the control room rendered it non-functional.The manual operation of firewater pumps,due to divers in the water before the incident,complicated response efforts.There were 226 individuals on the platform at the time of the accident;only 61 survived.This was partly due to the location of the living quarters above the initial release site.Piper Alpha,North Sea,UK06/07/1988#01Adjusted property loss value 2023(US$million)Original property loss value(US$million)FIRE AND EXPLOSIONWhile installing a pig trap on an 18-inch export gas pipeline,a cold cut in a pipe resulted in the release and ignition of hydrocarbons.The incident triggered a destructive explosion and fire that engulfed the main structure and led to further explosions when nearby pipelines ruptured due to the intense heat.The accident led to the destruction of the platform and seven fatalities.It took two years to replace the platform.Baker,Gulf of Mexico,US19/03/1989#04FIRE AND EXPLOSIONA well-intervention vessel lost power and collided with an uncrewed platform in the 230,000 bbl/d complex.The force of the collision caused the vessels bow to compress by about two meters.The collision caused severe damage to the platform,reportedly affecting 23,000 bbl/d oil production.The platform was partially displaced,resulting in the loosening of several support legs from the main load-bearing structure.There was also damage to the linking access bridge,well equipment,one of the platforms water injection risers was significantly bent,and several wellheads were displaced.Ekofisk,North Sea,Norway04/06/2009#05COLLISION750109285024304001113100 largest losses in the hydrocarbon industry50UPSTREAMExplosions from a gas release affected the worlds largest offshore production facility.The explosions led to the displacement of a support pillar on the semi-submersible platform,allowing seawater to enter the vessel.In an attempt to maintain the rigs buoyancy,workers injected nitrogen and compressed air and pumped out almost 3,000 tons of seawater.However,these efforts were unsuccessful,and five days after the incident,the rig sank to the sea floor.Eleven lives were lost.Roncador Field,Campos Basin,Brazil15/03/2001#06EXPLOSIONAdjusted property loss value 2023(US$million)Original property loss value(US$million)During the conversion of a platform well from oil to gas production,a high-pressure gas pocket forced the drill pipe out of the well,leading to a well blowout.The blowout preventer failed to shut in the well,resulting in the ignition of the escaped gas.The fire lasted 31 days,destroying most of the platforms topside structure.The facility was declared a total loss.To expedite the resumption of operations,the production module underwent a redesign within 45 days.Full production recovery was achieved 18 months after the incident.This accident showed the importance of robust well-control measures and disaster recovery planning in offshore drilling operations.Enchova,Campos Basin,Brazil24/04/1988#08BLOWOUTIn the Gulf of Mexico,a fire erupted in a complex of six offshore platforms situated in 30 meters of water.The blaze originated on the lower decks of the production platform,causing severe damage to the platform and radiation and fire damage to an adjacent compression platform.Bridge links and pipelines were lost and other bridge links sustained radiation damage.A government investigation attributed the initial failure to corrosion within a small-bore pipeline.The incident underscored the importance of proactive infrastructure maintenance and corrosion prevention measures in offshore environments.Bay of Campeche,Mexico04/01/2015#15FIRE5001053330943640823100 largest losses in the hydrocarbon industry51UPSTREAMAdjusted property loss value 2023(US$million)Original property loss value(US$million)The main turret bearing on a floating production storage and offloading vessel experienced a seizure and eventual failure,causing the vessel to lose its weather-vaning capability.Production was resumed with a revised operating regime employing tugs to maintain a constant heading.Subsequently,the vessel was converted to establish a permanent spread moored configuration.The reconfiguration secured the vessels heading and the integration of a deep-water offloading buoy to facilitate operations.Jubilee Field,Ghana11/02/2016#17MECHANICAL FAILUREDuring cementing operations on the offshore platform,a surge in formation pressure led to a well blowout.The catastrophic event caused the release of substantial amounts of fluid,gas,and subsoil debris into the atmosphere.Sparks generated during the ejection of sand and rocks from the well led to its ignition.The platform sustained extensive damage as a result of the incident.Cook Inlet,Alaska,US20/12/1987#18FIRE AND EXPLOSIONIn Mississippi Canyon block 252,about 50 miles off Louisianas coast,a well integrity failure led to a major explosion and fire on a deepwater semi-submersible drilling rig.Eleven lives were lost and 17 crew members were injured.Within 36 hours,the rig sank in a water depth of approximately 5,000 ft.The exploration well had reached a total depth of 18,360 ft and was undergoing cementing operations for temporary abandonment when the well control incident occurred.A buckled drill pipe in the blowout preventer(BOP)hindered the blind shear ram from cutting the pipe and sealing the well.Hydrocarbons continued to flow through the damaged BOP for 87 days before a successful static kill.The event required an unprecedented subsea and surface spill control response,ending after five months with the successful interception of a relief well,releasing approximately five million barrels of hydrocarbons into the environment.Macondo,Gulf of Mexico,US20/04/2010#20BLOWOUT650818273807560798View CSB investigation video100 largest losses in the hydrocarbon industry52UPSTREAMA newly operational offshore pipeline in Kazakhstan was found to have a gas leak.The affected section was repaired,but more leaks appeared in both the gas and oil pipelines.The root cause was identified as localized hardness in the pipes that led to sulfide stress cracking.To resolve the issue,both pipelines were replaced.Caspian Sea,Kazakhstan24/09/2013#21Adjusted property loss value 2023(US$million)Original property loss value(US$million)MECHANICAL FAILUREA significant incident led to the destruction of an oil platform and the loss of 22 lives.A multi-purpose support vessel was taking a worker to a medical center when it collided with the platforms riser,causing a major explosion.The vessel caught fire and eventually sank.The crews of two nearby platforms were saved when connecting bridges collapsed.The 150 individuals on board were transferred to a nearby water injection platform.An additional 348 individuals were safely evacuated from the oil platform despite challenging weather conditions.The fire also engulfed a cantilever jack-up rig linked by a bridge to the process platform,and one employee died.Six divers were trapped in a saturation chamber on the vessel in a separate but related incident.They were successfully rescued after 36 hours.Mumbai High North Field,India27/07/2005#24COLLISIONA fire at a production platform caused extensive damage and a production loss of approximately 100,000 bbl/d.The fire was extinguished the next day,and production fully restored after several days.Eight workers sustained injuries and two individuals lost their lives.An ongoing investigation is underway to determine the cause of the fire.Cantarell Field,Gulf of Mexico,Mexico07/07/2023#26FIRE AND EXPLOSION596796600600370642100 largest losses in the hydrocarbon industry53UPSTREAMDuring the process of connecting an extended tension leg platform to freestanding tendons,adverse weather and challenging loop current conditions necessitated a temporary suspension of installation operations.During this delay,nine of the 16 freestanding tendons collapsed to the seafloor.The incident was attributed to bolt failure.The bolts didnt secure the temporary buoyancy modules,causing the tendons to collapse.A debris removal operation was initiated for the tendons that had fallen to the seabed and some of the piles on the seabed also incurred damage.Big Foot Field,Gulf of Mexico,US18/04/2015#27Adjusted property loss value 2023(US$million)Original property loss value(US$million)MECHANICAL FAILURESevere North Sea storm conditions caused four of the floating production storage and offloading(FPSO)vessels 10 anchor chains to fail,displacing the FPSO.The vessel faced 53-knot winds and nine-meter waves.The incident damaged the complex piping system connecting the seabed wells to the FPSO.In response,all wells were promptly shut down.Subsequent assessments revealed no oil loss.Seventy-four non-essential crew members were evacuated to nearby platforms,while 43 essential crew remained on board,with two sustaining minor injuries.Prior to the event,the facility had an estimated average oil production of 18,400 bbl/d.Gryphon,North Sea,UK04/02/2011#29NATURAL CATASTROPHEA semi-submersible rig experienced a gas kick at 15,527 feet while attempting to clear cement from the drill pipe during drilling.This led to a well blowout.It took 11 months to regain control of the well by injecting heavy mud through a relief well.An additional four months were needed to complete the cleanup and the final abandonment of the blowout well.Treasure Saga,North Sea,Norway20/01/1989#30BLOWOUT488628450613220612100 largest losses in the hydrocarbon industry54UPSTREAMAfter construction of the gravity base structure of a platform was completed,deep submergence tests were underway to verify the structures integrity before mating with the deck and module installation.Upon reaching the seabed,the structure experienced a catastrophic failure,leading to its submersion and fragmentation.An investigation revealed cracks in the tricell walls and insufficient reinforcement,which resulted in the failure of the structure.All 14 people onboard the platform were uninjured and rescued by nearby boats.Troll,North Sea,Norway23/08/1991#31Adjusted property loss value 2023(US$million)Original property loss value(US$million)MECHANICAL FAILUREDuring an inspection of the Siri platform in the North Sea,cracks were discovered in the sponson cantilever extension connected to the primary oil storage tank.To enable an internal examination,access openings were created in the sponson walls,with miniature remotely operated vehicles(ROVs)deployed for the inspection.A total of 39 internal cracks were identified.The primary issue was attributed to the insufficient design of the support structure for the caisson.Siri Field,North Sea,Norway14/03/2003#35MECHANICAL FAILURESustained casing head pressure leaked from the production casing into the outer casing strings,leading to the failure of one of the casing strings.The event triggered an underground blowout,which significantly damaged the platform and a gas plume around the platform.To restore stability to the seabed,the well was successfully killed.Bourbon Field,Gulf of Mexico,US04/11/1987#33BLOWOUT230612200594291567100 largest losses in the hydrocarbon industry55UPSTREAMThe Fateh Field L-3 development well had reached a depth of 4,180 feet when an unexpected kick occurred during drilling operations.As attempts to control the kick failed,the rig was evacuated due to a gas breakthrough around the 20-inch casing shoe,with gas seeping beneath the platform.Eight days after the initial blowout,the accumulated gas ignited.Over the subsequent two weeks,both the drilling rig and platform sank.Fateh L3,Dubai,UAE01/07/1975#41Adjusted property loss value 2023(US$million)Original property loss value(US$million)BLOWOUTHurricane Dennis swept through the platforms vicinity,causing it to partially sink.The incident was attributed to the incorrect installation of a seawater valve in a ballast tank,which caused an overflow of water in the tanks.Fortunately,the platform had already been evacuated,and no oil,fuel,or hazardous substances were released.However,it setback production by three years.The company retrieved and reconstructed all the sea-bed production equipment to address the issue.Subsequent testing identified metallurgical failures in various components of the field sub-sea systems.Thunder Horse,Gulf of Mexico,US10/07/2005#48NATURAL CATASTROPHE79457250434100 largest losses in the hydrocarbon industry56UPSTREAMOil,condensate,and hydrogen sulfide were released from a wellhead on a platform undergoing maintenance in the Timor Sea.As a safety measure,69 workers on the jack-up rig were evacuated.The incident was triggered when a plug obstructing one of the projects 1,200-meter-deep wells came free,leading to oil and gas spills.A spill measuring 12 km in length and 30 m in width was reported the next day.Efforts were made to seal the well over the following two months,with an estimated daily leak rate of 400 barrels of oil and gas.On November 1,it was reported that drillers had successfully intercepted the well and commenced the injection of heavy mud to seal it.However,a fire broke out on the drilling platform while attempting to plug a deeper leak.The fire was extinguished two days later.Approximately 4,140 tons of oil were estimated to have been lost in this incident.Both the platform and the drilling rig were impacted.Montara,Timor Sea,Australia21/08/2009#57A semi-submersible vessel was subcontracted to transport a newly constructed platform from Singapore to Angola.The vessel capsized after striking a submerged object,which ruptured four empty ballast tanks and penetrated one cofferdam and a space between the forward and aft engine rooms.Rapid flooding caused the vessel to sink within approximately five minutes of striking the object.The object was likely an unmarked reef or rock.The platform sank in 35 meters of water and had to be rebuilt.Straits of Malacca22/01/1999#59Adjusted property loss value 2023(US$million)Original property loss value(US$million)BLOWOUTMECHANICAL FAILURE158354250364100 largest losses in the hydrocarbon industry57UPSTREAMA fire erupted during drilling operations at an offshore gas production platform due to a well-control incident.The fire was initially contained but eventually spread to a nearby jack-up drilling rig owned by a major drilling contractor,causing significant damage and the rigs collapse.All 79 people on the drilling rig were safely evacuated;the production platform,accommodating 150 personnel,had been evacuated earlier.The drilling rig sank and couldnt be salvaged.The platform sustained irreparable damage,leading to its ordered decommissioning by the authorities.Temsah,Egypt10/08/2004#64Adjusted property loss value 2023(US$million)Original property loss value(US$million)BLOWOUTA series of underwater visual inspections revealed cracks in a platforms concrete external diaphragm walls.Investigations revealed that the stresses endured by these diaphragms throughout their construction,towing,and platform installation phases were sufficient to initiate the cracks.The cracks was not attributed to a single isolated incident but as a result of cumulative stress factors over time.Frigg Field,North Sea,Norway15/03/1974#65MECHANICAL FAILUREA natural gas drilling rig submerged in the Caribbean Sea.All 95 workers were safely evacuated,and no reported leakage transpired.The sinking resulted from a sudden inflow of water into one of the submarine rafts supporting the platform legs.Automatic sub-sea safety valves sealed the wells,preventing any oil leakage.Caribbean Sea,Venezuela13/05/2010#67MECHANICAL FAILURE23533554341190347100 largest losses in the hydrocarbon industry58UPSTREAMAn explosion occurred on a floating production storage and offloading(FPSO)vessel off the coast of Brazil,leading to nine fatalities and multiple injuries.The incident took place while the vessel was anchored in the Atlantic Ocean,approximately 120 km off the coast of Espirito Santos,Brazil.The FPSO,originally a large crude oil tanker converted to produce up to 10 million cubic meters of natural gas,experienced a condensate leak during a fluid transfer operation,releasing a flammable vapor cloud into the engine room.The cloud ignited,causing an explosion in the machinery space.Although the FPSO took on water,the explosion did not breach the vessels hull.Most of the fatalities were among the emergency response team.Camarupim Field,Brazil03/11/2015#70EXPLOSIONAdjusted property loss value 2023(US$million)Original property loss value(US$million)A supply vessel collided with a jacket on the Auk field,causing severe damage to the platform.Three braces were lost and a fourth was severely bent.The impact also damaged the platforms topside facilities.The supply vessel that collided with the Auk field platform was a semi-submersible drilling rig that was used as a supply vessel at the time of the incident.Auk Field,North Sea,UK01/08/1975#74COLLISIONA jack-up drilling rig sank as the seabed unexpectedly collapsed beneath one of its three support legs.The incident occurred during the rigs positioning for drilling operations in roughly 40 meters of water.The abrupt tilt led to the rig taking on water and subsequently capsizing.At the time,the rig accommodated 103 workers.One crew member was listed as missing,and six others sustained minor injuries.Atlantic Ocean,near Angola01/07/2013#76MECHANICAL FAILURE23531555316250322100 largest losses in the hydrocarbon industry59UPSTREAMOffshore gas alarms on the floating production unit were activated and a subsequent investigation confirmed a leak from one of the production risers.Further examinations showed that five additional risers were impacted by similar issues.Corrective measures were implemented to address the situation.North Sea,Norway05/11/2006#80Adjusted property loss value 2023(US$million)Original property loss value(US$million)MECHANICAL FAILUREA semi-submersible rig vanished from radar screens amid a powerful storm.The storm generated waves of up to 37 feet and winds of up to 90 knots.The rig designed to operate in harsh weather conditions,was battered by the waves and wind for several hours,and eventually capsized and sank.The rig was discovered submerged upside down in 300 feet of water.All 84 crew members on board died.North Atlantic Ocean,near Newfoundland,Canada15/02/1982#84MECHANICAL FAILURETyphoon Koppu reached maximum intensity with estimated wind speeds of approximately 140 km/hr(about 75 knots)near its center.A floating production storage and offloading vessel(FPSO)was positioned roughly 60 miles from Typhoon Koppus center.Adverse weather conditions led to four out of eight mooring lines failing,particularly those near the Buoy Turret Mooring(BTM)system.Consequently,the BMT/FPSO was anchored in place by the remaining four mooring lines,although it had shifted approximately 600m to 700m north of its original location.There was extensive damage to the mooring system,risers,pipeline end manifolds(PLEMS),and varying degrees of damage to piping and power cables near the PLEMS.South China Sea15/09/2009#87NATURAL CATASTROPHE18530719127892292100 largest losses in the hydrocarbon industry60UPSTREAMAn apparent failure of a propane intercooler liquid level control during unsupervised maintenance led to an explosion and fire.The control room on the main platform was destroyed,and adjacent platforms were affected by the blast wave.The incident resulted in eleven fatalities.Lama,Lake Maracaibo,Venezuela25/03/1993#94Adjusted property loss value 2023(US$million)Original property loss value(US$million)MECHANICAL FAILURE100254100 largest losses in the hydrocarbon industry61Refining14|Refining losses197419751976197719781979198019811982198319841985198619871988198919901991199219931994199519961997199819992000200120022003200420052006200720082009201020112012201320142015201620172018201920202021202220230YearLoss value(US$million)100080060040020014001200There were no new additions to the top 100 from this sector in the last two years.However,there have been several notable refining losses:a fire in Spain(April 2023),a fire in the US on a unit processing alkylate(February 2022),a mechanical incident causing significant damage in Austria(June 2022),a fire in the US(June 2022),a fire and explosion in the US(September 2022)and a fire at a refinery in the US(August 2023).The worldwide group of oil refineries is,with some exceptions,a group of aging assets.Older assets have often been subject to both expansion projects to increase capacity,and retrospective installation of high-value,high-conversion assets.These factors have resulted in higher concentration of value at sites.Refineries process crude oil and therefore,have a far more dynamic and broad feedstock range than the other asset classes.The combination of aging assets,increased concentration of value,and diverse feedstocks,are all likely to have contributed to the fact that this sector makes up the largest proportion of the top 100 losses.100 largest losses in the hydrocarbon industry62REFININGDuring a maintenance operation,the accidental release of hot,light hydrocarbons led to a significant fire.The incident occurred at a newly commissioned residual fluid catalytic cracking(RFCC)unit,part of a major expansion effort that doubled the refinerys overall capacity.The severity of the fire led to the temporary closure of the expanded refinery area and required extensive rebuilding work to restore normal operations.Abu Dhabi,UAE11/01/2017#03Adjusted property loss value 2023(US$million)Original property loss value(US$million)A hydrocarbon release occurred from a reactor vessel on a naphtha hydrotreater unit operating at approximately 25 bar and 140 degrees celsius.The release of hot naphtha and hydrogen formed a vapor cloud that ignited,resulting in an explosion and fire.The explosion triggered additional releases from other parts of the plant,including a nearby diesel hydrotreater that intensified the fire.Eight on-site employees suffered injuries,but no fatalities were reported.Residents of a nearby town were evacuated as a precaution,and hundreds of firefighters were deployed to control the fire.Extensive damage occurred in several refinery process units,offices,and maintenance buildings,and even caused window breakage in a village approximately 3km away.The initial release of hydrocarbon was attributed to a 1.5-meter crack near the welded vessel support in the reactor vessel,although detailed investigation findings have not been widely disclosed.Vohburg,Germany01/09/2018#11FIRE AND EXPLOSIONMECHANICAL FAILURE10001200770896100 largest losses in the hydrocarbon industry63REFININGAn explosion happened when employees tried to isolate a leak in a condensate line connecting an off-site NGL plant and refinery gas plant.Three crude units were damaged and two reformers destroyed.It took around nine hours to extinguish the subsequent fire,which resulted in five fatalities and 50 injuries.The investigation revealed a deficiency in the inspection and maintenance of the condensate line,which was not owned by the refinery.The lack of a clear understanding regarding the lines ownership is thought to have caused delays in isolating it.Mina Al-Ahmadi,Kuwait25/06/2000#12EXPLOSIONIn a 90,000 bbl/d fluid catalytic cracking(FCC)unit operation,an eight-inch diameter carbon steel elbow,positioned 50 feet above ground in a depropanizer column overhead piping system,suffered a catastrophic failure due to internal corrosion.Approximately 20,000 lb of C3 hydrocarbons were released,creating a substantial vapor cloud within the 30 seconds before ignition.The depropanizer column and accumulator depressurized through the breach.The vapor cloud most likely ignited from the FCC charge heater.The initial explosion obliterated the FCC control building,toppling the 26-foot diameter main fractionator and causing widespread damage across the 215,000 bbl/d refinery.Off-site damage resulted in around 5,200 property claims.The FCC unit was eventually demolished and a new unit was constructed.Preliminary findings revealed unexpectedly high localized corrosion rates in the failed elbow.Norco,Louisiana,US 05/05/1988#16Adjusted property loss value 2023(US$million)Original property loss value(US$million)MECHANICAL FAILURE412892288823100 largest losses in the hydrocarbon industry64REFININGA major explosion occurred at a 145,000 bpd refinery in Sendai just hours after Japans largest-ever earthquake and subsequent tsunami.The fire originated in the oil product shipping area.No fire suppression capabilities were in place and workers were evacuated.The fire extended to the storage and shipping facilities,causing damage to a 35,500 bpd fluid catalytic cracker(FCC)at the refinery.Sendai,Japan11/03/2011#19Adjusted property loss value 2023(US$million)Original property loss value(US$million)NATURAL CATASTROPHEA fire and subsequent explosion occurred near the distillation unit of a refinery,necessitating a complete site shutdown.Four of the 13 units at the site were destroyed,and three suffered partial damage.The cause of the incident has not been widely shared.Limbe,Cameroon31/05/2019#22FIRE AND EXPLOSION191614Before the rupture of a 55-foot-tall,8.5-foot-diameter monoethanolamine absorber column at a refinery,a crack was discovered at a circumferential weld that was leaking propane.Efforts to close the inlet valve were underway when the crack expanded to 24 inches.The area was evacuated,and the plants fire brigade was notified.The column eventually failed,propelling most of the 20-ton vessel 3,500 feet before striking and toppling a 138,000-volt power transmission tower.The rupture happened along a lower girth weld which was made during repairs a decade earlier.Substantial fires occurred in various refinery units,with one explosion breaking windows up to six miles away.Extensive structural damage disrupted electrical power,affecting firefighting capabilities.Responding fire departments,including those from neighboring plants,worked collectively to manage the incident.Romeoville,Illinois,US23/07/1984#28MECHANICAL FAILURE600698590804100 largest losses in the hydrocarbon industry65REFININGThe 160,000 bbl/d capacity refinery underwent a shutdown due to a pool fire originating from a pipework release within the crude distillation unit.Three days later,an internal fire caused a structural failure in the crude column,resulting from air ingress due to the previous ruptured pipeworks reaction with pyrophoric material and oil in the column.This led to a 12-month shutdown of the crude distillation unit.The initial pool fire resulted from incorrect piping material specification in one elbow,which ultimately failed.Lemont,Illinois,US14/08/2001#32A vapor cloud explosion disrupted a gas plant associated with a 29,700 bbl/d fluid catalytic cracker(FCC)unit in a 136,000 bbl/d refinery.The initial explosion involved around 11,000 lb of light hydrocarbons and could be heard miles away.The units detection system had picked up a gas leak,likely due to a ruptured recovery pipe for butane and propane from the FCC unit.The incident severely damaged nearly two hectares of the refinery,including the gas plant,FCC unit,and control building.The construction of two new process units nearby was also heavily impacted,and windows broke in neighboring areas.Firefighters from several locations and the refinerys brigade spent over six hours controlling the situation,using around 37,000 US gallons of foam concentrate.La Mede,France09/11/1992#34Adjusted property loss value 2023(US$million)Original property loss value(US$million)285601225586MECHANICAL FAILUREMECHANICAL FAILURE100 largest losses in the hydrocarbon industry66REFININGAn explosion occurred at a 70,000 bbl/d oil refinery,damaging several components,including the fluid catalytic cracker(FCC),storage tanks,and the asphalt unit.Four people were injured.The accident occurred on a public holiday,with only 40 people present on-site(typically,four times that number would be on duty).With assistance from local fire departments,the refinerys fire brigade managed to control the fire on the same day.The release is believed to have been linked to the catastrophic failure of a pump during a propylene splitter unit start-up.Some processing operations resumed two months later,and the FCC was re-commissioned eight months after the event.Big Spring,Texas,US18/02/2008#36EXPLOSIONAn explosion occurred on an oil sands upgrader site north of Fort McMurray,Alberta,injuring five workers,including one who suffered third-d
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This document has been licensed to UiPathJuly 2024Process Orchestration Harnessing the Transformative Power of Automation ContentsCopyright 2024,Everest Global,Inc.All rights |this document has been licensed to UiPath03Introduction04Scaling automation:enterprise priorities and challenges07Why IA is incomplete without process orchestration12Understanding process orchestration solutions16Process orchestrations use cases across key industries19Process orchestration adoption:challenges and best practices21Conclusion and future |EGR-2024-X-V-XXXXProcess Orchestration Harnessing the Transformative Power of AutomationI|this document has been licensed to UiPathIn the digital age,enterprises constantly seek innovative ways to streamline operations,improve efficiency,and deliver exceptional customer experiences.This has led to increased adoption of Intelligent Automation(IA)technologies,such as process intelligence,Intelligent Document Processing(IDP),and conversational AI,over the past few years.Enterprises have successfully deployed automations for low-hanging fruits and simpler,high-volume repetitive tasks.However,they face challenges when scaling these initiatives to more complex,long-running processes.Efficiently orchestrating a hybrid workforce is a vital hurdle for enterprises striving to scale their automation initiatives.This imperative has driven a shift toward adeptly managing processes involving human and digital workers,making process orchestration technology a cornerstone within the IA ecosystem.Enterprises are gradually realizing the potential of process orchestration and its role in the overall IA ecosystem.However,many enterprises still stick to traditional approaches for process orchestration adoption,leading to high costs,inadequate RoI,and prolonged time-to-value.These limitations of traditional process orchestration have paved the way for a modern approach.This approach seamlessly integrates process orchestration with process intelligence and automation technologies,such as Robotic Process Automation(RPA)and IDP,enabling rapid implementation of continuous process improvements.Today,process orchestration has widespread applications across many industries.Notably,organizations that have implemented process orchestration solutions effectively scaled their automation journeys and achieved superior business outcomes.In this viewpoint,we examine:Enterprise business priorities and barriers to scaling automation Why IA is incomplete without process orchestration Process orchestration solutions Process orchestration use cases across key industries Key challenges and best practices when adopting process orchestration for scaling automation Organizations looking to scale their automation programs,executives responsible for digital transformation and automation initiatives,and operational leaders responsible for optimizing business operations will benefit from this |this document has been licensed to UiPath4Process Orchestration Harnessing the Transformative Power of AutomationScaling automation:enterprise priorities and challengesEnterprises key business prioritiesIn todays fast-paced and dynamic business environment,enterprises are constantly evolving to meet the demands of a competitive landscape.Rapid technology advances and shifting consumer behaviors are compelling businesses to reassess their strategies,seeking greater agility and responsiveness.This relentless drive for innovation and adaptability is essential for enterprises to thrive in an increasingly complex and interconnected global market.In 2024,various factors influence enterprise business priorities,such as macroeconomic uncertainties,geopolitical tensions,government regulations,changes in competitors strategies,shifts in customer behavior,and technology adoption.Here are the top five enterprise priorities in 2024:Boost operational efficiency:streamlining operations and enhancing productivity through automated and optimized business processes Maximize revenue:expanding into new markets,launching new products,and enhancing pricing strategies to drive revenue growth Generate cost savings:reducing costs through outsourcing,adopting new technologies,and optimizing resources Enhance customer experience:providing personalized,high-quality service across all customer touchpoints Improve employee experience:boosting employee satisfaction and engagement by creating a positive work environmentEnterprise leaders are increasingly embracing digital technologies as a key lever to achieve their business priorities.Improving operational efficiency is the top-of-the-mind business priority for enterprises.The other key priorities include maximizing revenue,generating cost savings,and enhancing stakeholder |this document has been licensed to UiPath5Process Orchestration Harnessing the Transformative Power of AutomationExhibit 1:External factors influencing business priorities in 2024Source:Everest Group 2024 Key Issues StudyThe external factors influencing business priorities are represented in Exhibit 1.Notably,76%of enterprises see adopting new technologies as a positive influence on their overall business and believe it will help them achieve their priorities.Automation and AI are among the top three next-generation technology areas where enterprise leaders are looking to accelerate their investments,as illustrated in Exhibit 2.Negative influenceNeutralPositive influenceEvolution and adoption of new technologies14v%Changes in customer interest and purchasing behavior27!R%Changes in competitors strategies,market share,and offerings3181%Government policies and regulations411(%Global macroeconomic conditions75%4!%Geopolitical environment68%|this document has been licensed to UiPath6Process Orchestration Harnessing the Transformative Power of AutomationExhibit 2:Top digital investments for the next 6-12 monthsSource:Everest Group 2024 Key Issues Study and 2023 Key Issues StudyEnterprises continue to achieve significant benefits from their automation and AI deployments compared to enterprises that have yet to deploy these technologies.Exhibit 3 demonstrates enterprise outcome comparison along the cost,operational,and strategic impact.Exhibit 3:Enterprise outcomes comparisonSource:Everest Groups Enterprise Intelligent Automation Pinnacle Model Assessment 2022However,scaling automation and AI programs has been challenging.Growth in spend2023 rank2024 rankExpected growth in spendCybersecurity21Cloud solutions12Automation and AI43Big data analytics34Generative AINew addition in 20245Moderate(4-5%)Low(2-3%)Significant(more than 6%)Strategic impactExperienced 60%higher impact in strategic areas,such as employee experience,top line growth,customer satisfaction,and time-to-market.Operational impactAchieved1.4X improvement in operational metrics such as employee productivity,turnaround time,and operational efficiency.Cost impactGenerated approximately 2.3X ROI and 3.7X higher cost |this document has been licensed to UiPath7Process Orchestration Harnessing the Transformative Power of AutomationChallenges in scaling automation initiatives Enterprises face several challenges in scaling their automation initiatives,including:Orchestrating digital and human workforces:a key hurdle,especially when scaling automation to long-running or complex workflows Understanding processes:essential for prioritizing suitable processes for automation,and a lack of it hinders efforts Change management:resistance to change within the organization impacts automation initiatives Raising technology awareness:limited understanding impedes the progress of automation projects Overcoming a siloed approach:teams working in isolation lead to inefficiencies,making it difficult to scale automation across the entire organization Securing stakeholder buy-in:limited understanding of new technologies and their benefits hinders support Identifying transformation opportunities:the complexity and scale of operations make this challenging Addressing talent shortages:automation and transformation initiatives demand new skills and expertise,often not readily available in the existing workforceAmong these challenges,orchestration is the topmost barrier to scaling automation in an enterprise.Without effective orchestration,automation efforts result in limited scale,poor governance,and disruptions to vital processes.Why IA is incomplete without process orchestrationWhat is a process?A process is a comprehensive sequence of workflows and tasks designed to achieve a specific business outcome.Within a process,a workflow represents the sequence of tasks and activities carried out to complete a specific piece of work.Each task is a unit of work or a series of activities contributing to a goal,while an activity is a specific action or set of actions that are part of a task.Exhibit 4 demonstrates an Accounts Payable(AP)process with details into workflows,tasks,and activities that are part of the |this document has been licensed to UiPath8Process Orchestration Harnessing the Transformative Power of AutomationExhibit 4:Detailed view into the Accounts Payable(AP)processSource:Everest Group(2024)In the AP process,there are different workflows(e.g.,vendor management,Purchase Order(PO)creation,invoice processing).When we take the case of an invoice processing workflow,it includes tasks such as invoice receipt and capture,invoice validation,invoice matching,and invoice approval.The invoice validation task involves activities such as reviewing the invoice details,checking duplicate invoices,and performing compliance-related checks.In summary,activities are the smallest units of work,tasks are collections of activities,workflows are sequences of tasks,and processes are comprehensive sequences of workflows designed to achieve a specific business outcome.WorkflowsTasksActivitiesVendor managementPurchase Order(PO)creationExpense reportingPayment processingInvoice processingCompliance managementInvoice receipt and captureInvoice validationInvoiceapprovalInvoicematchingChecking invoice detailsChecking invoice with POsCompliance related checksChecking duplicate invoicesProcessAccounts Payable(AP)|this document has been licensed to UiPath9Process Orchestration Harnessing the Transformative Power of AutomationRole of process orchestration in enabling automations at scaleProcess orchestration is software that helps design,execute,and monitor end-to-end business processes.It includes key capabilities such as process modeling,business rules management,designing user interfaces for capturing and presenting data,hybrid workforce management,and providing process-related insights.Process orchestration is the backbone of modern automation strategies,enabling organizations to achieve agility and adaptability in their operations.It plays a vital role in scaling automation to long-running workflows in three different ways.Bridging the gap between discovery and executionProcess orchestration is the connective tissue between the insights generated by process intelligence solutions and associated actions.This integration enables enterprises to identify opportunities for improvement and implement these enhancements in a structured and scalable manner.Modern process intelligence technologies,including process mining,digital interaction intelligence,and communications mining,are essential for validating and executing optimizations and automation.These tools provide continuous discovery and analysis to offer real-time insights.Process orchestration can be leveraged for execution post the discovery and analysis using process intelligence solutions in the following ways:Data-driven insights:offering a comprehensive view of existing processes,highlighting inefficiencies and bottlenecks Governance and compliance:ensuring all changes are systematically controlled and aligned with compliance standards,maintaining consistency and reliability across the organizationProcess simulation:simulating the impact of automation/optimization ideas to ensure they deliver expected value/RoI,and managing these automated/optimized processes effectively with process orchestrationContinuous monitoring:providing ongoing visibility into the performance of business processes,allowing for further improvements using automation and process orchestration solutionsAutomation integration:strategically identifying automation areas,deploying various automation technologies,and managing the automated processes effectively with process |this document has been licensed to UiPath10Process Orchestration Harnessing the Transformative Power of AutomationIn essence,process orchestration bridges the gap between discovery and execution.By leveraging process intelligence technologies,enterprises can validate insights,optimize processes,and implement automation in an actionable and scalable manner.This holistic approach enhances operational efficiency and fosters a culture of continuous improvement,ensuring sustained competitive advantage.Holistic action on discovered automation and optimization insightsEnterprises analyze insights discovered from process intelligence solutions to take actions such as automating and optimizing processes.It is important to note that automating a poorly performing process can amplify inefficiencies.Hence,enterprises must prioritize optimizing their business processes first to ensure they are streamlined and effective before scaling up automation initiatives.Based on the discovered and prioritized automation opportunities,enterprises leverage RPA,IDP,API automation,and conversational AI solutions to automate their processes.After these optimizations and automation deployments,enterprises must implement process orchestration solutions to manage these automated processes effectively.Process orchestration helps integrate automation and optimization efforts within a unified platform rather than handling them in silos.By using process orchestration solutions for both automation and optimization,enterprises can generate more cost savings and achieve greater efficiency,eliminating bottlenecks and inefficiencies holistically.Managing complex processes across automated,human,and system stepsIn todays era of widespread automation,process orchestration is essential to manage the interplay between automated,human,and system steps.With the increasing adoption of AI-driven automation solutions,organizations are transitioning to a hybrid workforce where automation tools,human expertise,and system integrations collaborate to drive business outcomes.Process orchestration ensures seamless coordination between automated processes,human interventions,and system actions that span multiple teams and applications.By orchestrating the flow of work across the hybrid workforce,organizations can unlock new levels of productivity,innovation,and customer value.Key features such as AI-based task allocation,centralized exception handling,and workload optimization are essential for the effective management of complex processes.AI-based task allocation:dynamically assigning tasks to the most appropriate resource,whether a digital worker(for example,RPA and IDP),a human worker,or a combination of bothCentralized exception handling:promptly addressing issues to minimize disruptions and maintain workflow continuityWorkload optimization:efficiently utilizing all resources,preventing bottlenecks,and maximizing |this document has been licensed to UiPath11Process Orchestration Harnessing the Transformative Power of AutomationThis integrated approach enhances operational efficiency and drives innovation by allowing human workers to focus on strategic activities while automation and system processes handle routine tasks.Through process orchestration,organizations can handle complex processes effectively across automated,human,and system steps,leading to improved business outcomes.Consequently,process orchestration is vital in an enterprise-grade intelligent automation solution.Exhibit 5 illustrates the Intelligent Automation Platform(IAP)architecture along with its key components.Exhibit 5:IAP architectureSource:Everest Group(2024)Process orchestrationLow-code/No-codeAI/ML/LLMProcess management and governanceInteraction/ExperienceAI-basedautomationProcess discovery and intelligenceRules-basedautomationProcess design and executionUI/UX/Forms developmentIDPProcess miningRPA(UI automation)Business rules managementConversational interfaces developmentConversational AITask mining(or)Digital Interaction Intelligence(DII)API automationFunctional layersHybrid W|this document has been licensed to UiPath12Process Orchestration Harnessing the Transformative Power of AutomationUnderstanding process orchestration solutionsProcess orchestration solutions key capabilitiesThere are four key capabilities of a process orchestration solution:Exhibit 6 outlines the architecture of a process orchestration solution.Process design and executionThis capability allows users to design business processes,document process maps,and execute processes.It also enables users to define scenarios and run AI-based simulations to aid in business decisionsBusiness rules and decision managementThis feature allows users to configure and execute business rules within the process and discover existing business rules in the business processesLow-code/No-code user interface developmentThis functionality allows users to create static and dynamic forms and build process-centric applications to automate workflows.The form builder also includes a centralized repository of standard reusable form templates for common use casesHybrid workforce managementThis capability helps in assigning tasks to resources,handling exceptions,and optimizing the workload between human and digital workforce using AI/ML algorithms.Users can configure alerts and notifications for any exceptionsProcess orchestration is a software that helps design,execute,and monitor end-to-end business processes.It also helps orchestrate the flow of work across human workers,digital workers(such as RPA,IDP,and conversational AI),and enterprise applications in long-running |this document has been licensed to UiPath13Process Orchestration Harnessing the Transformative Power of AutomationExhibit 6:Key components of a process orchestration solutionSource:Everest Group(2024)Integrating generative AI with process orchestrationGenerative AI,a subset of AI technology,empowers systems to generate content or data based on learned patterns and inputs.In the dynamic automation landscape,enterprises are exploring innovative approaches to optimize their operations and drive efficiency gains.Integrating generative AI with process orchestration can bring a paradigm shift,offering organizations unprecedented opportunities to optimize workflows,enhance decision-making,and deliver personalized experiences at scale.The Exhibit below highlights some key applications of generative AI across the process orchestration layers.Process discovery and analysisComponents of a process orchestratorEnterprise user interfaceProcessmodelerForm builder/App designerControl center/UI for collaborationAnalyticsdashboardCore enginesBusiness rulesengineWorkflow engineAPI/ConnectorsDatabaseHuman agentsEnterprise applicationsComplementary capabilitiesAutomationCoE leaderBusinessanalystProcessownerERPDocument management and collaborationCRMRPAIDPConversationalAI|this document has been licensed to UiPath14Process Orchestration Harnessing the Transformative Power of AutomationExhibit 7:Generative AI applications and impact across process orchestration functionalities Source:Everest Group(2024)A few providers have begun integrating generative AI capabilities,including the ability to create initial workflows from natural language prompts and a digital assistant to support daily tasks.These innovations help enterprises reduce process design time,enhance workforce productivity,and improve overall process efficiency.Providers are also investing in other generative AI features,such as form and application generation and chat interfaces for process insights.These advances enable enterprises to save time when creating forms and applications while achieving faster time-to-insights.Business rules managementGenerate and configure business rules through natural language instructions,dynamically aligning rules with real-time business conditionsLow-code/No-code UI development Generate forms and applications through natural language instructions Generate interfaces by uploading documents such as provider onboarding forms Automate code components creation based on predefined design principlesHybrid workforce management Assist humans in tasks such as auto-generating sales emails and drafting customer support responses Analyze the nature of tasks,historical performance data,and real-time workloads to optimize task allocation between human and digital workers Chat interface for generating process-related insights,reports,and summariesProcess design and execution Generate and edit initial workflows through natural language commands Generate positive and negative test cases for workflow testing Potential impact of generative AIHighL|this document has been licensed to UiPath15Process Orchestration Harnessing the Transformative Power of AutomationTraditional vs.modern approach to process orchestrationChallenges with a traditional process orchestration approach,such as high costs,insufficient RoI,extended time-to-value,and lack of adaptability,have paved the way for a modern process orchestration approach.Next-generation automation and discovery technologies are driving this shift.When comparing traditional and modern approaches to process orchestration,four distinct differences emerge.These differences are summarized in Exhibit 8.Exhibit 8:Traditional vs.modern approach to process orchestrationSource:Everest Group(2024)AspectTraditionalapproachModernapproachLacks capabilities to design automated processesOffers automation capabilities to build and manage automated processesAutomation capabilitiesModeling-heavy approach that starts with manual process designAutomated and continuous discovery using process intelligence solutionsProcessdesignReliance on IT teams for coding and technical expertiseChampions ease of use with low-code/no-code functionalitiesTechnical expertise Complex implementation cycles and long wait timesShorter implementation cycles with agile methodologiesImplementation |this document has been licensed to UiPath16Process Orchestration Harnessing the Transformative Power of AutomationFirstly,a traditional approach entails complex implementation cycles,marked by cumbersome development and integration processes and long wait times for process design and execution.In contrast,a modern approach embraces agility with shorter implementation cycles,leveraging intuitive tools for swift adaptation and iterative improvements.Secondly,enterprises using traditional methods tend to rely heavily on IT teams for coding or technical expertise,leading to heavy-weight implementations that increase the processs complexity.Conversely,the modern approach champions ease of use,featuring low-code/no-code features and AI capabilities that empower users to deploy and modify processes more efficiently,reducing the need for extensive coding knowledge.Thirdly,traditional methods are characterized by a modeling-heavy approach that starts with manual process design and modeling the to-be state.In contrast,a modern process orchestration approach allows for automated and continuous discovery using AI-based process intelligence solutions,providing a holistic view of processes and improvement opportunities on an ongoing basis.Based on the discovered insights,enterprises leverage process orchestration solutions to manage execution across different aspects,such as process redesign,process optimization,automation,and hybrid workforce management.This approach enables seamless integration with process intelligence and automation technologies,facilitating swift identification and implementation of desired improvements within the process flow on an ongoing basis.Lastly,traditional approaches often lack robust automation capabilities,making it difficult to manage and optimize automated processes.In contrast,the modern process orchestration approach includes advanced automation capabilities that leverage resilient long-running workflows.These capabilities enable seamless human and robot collaboration,incorporating complex decision logic,all from a single,integrated platform.This ensures that both human expertise and automated processes work together efficiently to drive optimal business outcomes.Process orchestrations use cases across key industriesProcess orchestration solutions have various applications beyond reducing inefficiencies and promoting transparency across industries.Enterprises often deploy them for workflow automation,hybrid workforce management,process standardization,and process governance and compliance.Here are some use cases across different industries:|this document has been licensed to UiPath17Process Orchestration Harnessing the Transformative Power of AutomationApproach to process orchestration Integrated banking systems across loan categories,ensuring a seamless flow of information Enabled collaboration among human-human and human-digital workers Deployed automated compliance checks and comprehensive audit trailsOutcomes achieved Reduced processing costs by minimizing manual errors Accelerated loan processing time through automated workflowsOrganization size 150,000 employeesTop adoption drivers Achieve cost savings by streamlining the loan processing workflow Improve customer experience by expediting loan processing timeKey sponsorChief Investment Officer(CIO)Challenges faced in the process Fragmented banking systems,resulting in longer loan processing times Lack of clear communication across different departments Difficulties in ensuring compliance with evolving regulationsUse caseLoan processingBanking and financial services(BFS)InsuranceApproach to process orchestration Integrated all systems and databases to ensure a smooth flow of data in the claims process Configured rules to analyze the complexity of cases and assign them based on skillset Built dashboards to identify and eliminate redundancies Outcomes achieved Reduced claims handling time,leading to higher customer satisfaction Increased employee productivity via case managementOrganization size 3,000 employeesTop adoption drivers Increase customer satisfaction and loyalty Improve the volume of claims processedKey sponsorChief Customer Officer(CCO)Challenges faced in the process Disparate data and systems,creating silos around sales,service,and claims teams Manual allocation of cases to claims adjusters leading to administrative burdenUse caseClaims |this document has been licensed to UiPath18Process Orchestration Harnessing the Transformative Power of AutomationOrganization size 600,000 employeesKey sponsorHead of AutomationUse caseClinical trials and managementHealthcare and pharmaApproach to process orchestration Deployed automation to extract data from documents and enter it into electronic systems Automated task allocation(for example,data collection)across human and digital workers Configured decision rules for automated approvals of clinical trial dataOutcomes achieved Standardized the clinical trials process Achieved time and cost savings due to process automation Timely approvals of clinical trial dataTop adoption drivers Generate cost savings through process automation Standardize the clinical trials processChallenges faced in the process Slow clinical trial coordination due to decentralized locations Long and time-consuming approval process Manual document processingApproach to process orchestration Integrated with third-party systems to enable data transfer and streamline operations Configured rules and alerts to ensure services are delivered on time to citizens Automated appointment scheduling and payment processing activities to enhance efficiencyOutcomes achieved On-time service delivery to citizens Significant reduction in errors in service delivery Ensured service delivery complies with regulationsTop adoption drivers Increase efficiency of the service delivery process Improve process governance and complianceChallenges faced in the process Error-prone and time-consuming service delivery process No connections to third-party systems such as eGovernment and commercial solutions(for example,SAP)Government and public sectorOrganization size 40,000 employeesKey sponsorIT DirectorUse casePublic service |this document has been licensed to UiPath19Process Orchestration Harnessing the Transformative Power of AutomationApproach to process orchestration Integrated Enterprise Resource Planning(ERP)and other systems to track materials and ensure data consistency Digitized paper-based processes and deployed automation to streamline workflows Established a feedback loop for improved collaboration between front-and back-office teamsOutcomes achieved Improved efficiency of the quality control process by reducing manual errors Enhanced governance and compliance in identifying defects and ensuring adherence to standardsOrganization size 4,000 employeesTop adoption drivers Reduce errors during quality checks Adhere to industry standards and regulations for material inspection Key sponsorVice President,Process and QualityChallenges faced in the process Manual and error-prone process involving spreadsheets,emails,and paper documents Lack of standardized processes and clear communicationUse caseQuality control and managementManufacturingProcess orchestration adoption:challenges and best practicesChallenges in adopting process orchestrationDeploying and scaling process orchestration solutions as part of automation initiatives presents several challenges that organizations must address to integrate them successfully into their operations.Lack of overall process visibility:Enterprises often struggle with a lack of visibility into their overall processes due to siloed operations and inadequate documentation of process steps.This lack of visibility can significantly extend implementation times for process orchestration and scaling automation initiatives within the processes Lack of technology awareness:Many organizations face challenges because employees have limited awareness and understanding of process orchestration technologies,their applications,and benefits.This gap in knowledge can hinder automation solutions effective |this document has been licensed to UiPath20Process Orchestration Harnessing the Transformative Power of Automation Lack of stakeholder alignment:There is frequently misalignment between business and IT teams,making it difficult for enterprises to adopt process orchestration solutions.Effective collaboration and alignment are essential for successful automation initiatives Internal resistance:Operational subject matter experts and stakeholders may be reluctant to adopt new tools/technologies and new ways of working.They can also resist automation and any changes that could streamline processes.This resistance can slow down process orchestration adoption Improper metrics:Operational teams lack of involvement and the inability to identify the right set of metrics or KPIs for tracking process performance can limit the adoption of process orchestration solutions.Proper metrics are essential for measuring the success and impact of automation initiativesAddressing these challenges requires proactive communication and collaboration across teams,clear process documentation,effective change management strategies,and establishing meaningful metrics to track progress and success.Organizations that successfully navigate these challenges are better positioned to leverage process orchestration for improved operational efficiency and agility.Best practices to maximize value with process orchestration Based on our research,enterprises that have successfully adopted process orchestration solutions at scale and realized maximum value from these initiatives have followed certain best practices,as discussed below:Starting small-scale:Initiating with small-scale deployments allows enterprises to identify and resolve task-level bottlenecks early on.This approach ensures a positive RoI by gradually adopting and expanding across multiple use cases Fact-based process understanding:Leveraging process intelligence tools provides a fact-based understanding of as-is processes and identifies improvement opportunities.This insight enables faster and more efficient process orchestration technologies adoption Stakeholder alignment:Involving business users early in the process is important to overcome resistance and cultural barriers during large-scale implementations.Business users can help identify pain points in current processes and draft solutions based on discovered insights,ensuring acceptance and maintaining momentum Performance measurement:Establishing appropriate KPIs from the outset and consistently monitoring performance is essential.Process intelligence tools play a key role in measuring and tracking the impact of changes driven by process orchestration solutions.This practice facilitates continuous process improvements and enhances automation outcomes over |this document has been licensed to UiPath21Process Orchestration Harnessing the Transformative Power of Automation Training and education:Driving awareness and understanding among business users is vital for successful implementation.Utilizing workshops,reports,videos,and structured training programs helps educate and equip business resources with the necessary skills to effectively use the process orchestration platform for streamlining business processesConclusion and future outlook As enterprises accelerate their automation initiatives,managing diverse processes involving a hybrid workforce becomes essential.Process orchestration provides essential governance,bridges the gap between insights and execution,and manages the flow of work across human and digital workers.Modern process orchestration solutions integrate AI,modularity,and low-code/no-code capabilities,enhance agility,and foster continuous improvement.Generative AI further amplifies efficiency and ease of use and drives innovation in these solutions.From streamlining operations and optimizing workflows to managing the hybrid workforce and ensuring governance,process orchestration solutions are indispensable for maximizing the benefits of automation initiatives across various industries.To ensure the successful adoption and integration of process orchestration solutions as part of their automation strategy,enterprises can start small-scale,meticulously document processes,align with different teams/stakeholders,establish performance measurement,and invest in education and training.Looking ahead,prioritizing investments in process orchestration capabilities will be essential for enterprises to maintain agility and innovation in todays dynamic business environment.Embracing process orchestration as a strategic imperative enables organizations to unlock new growth opportunities and succeed in the digital age.Everest Group is a leading research firm helping business leaders make confident decisions.We guide clients through todays market challenges and strengthen their strategies by applying contextualized problem-solving to their unique situations.This drives maximized operational and financial performance and transformative experiences.Our deep expertise and tenacious research focused on technology,business processes,and engineering through the lenses of talent,sustainability,and sourcing delivers precise and action-oriented 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New Horizons:Innovations in Real AssetsKnKno owwl le ed dg ge e B Brierief f V Vo ol lu umme e 1 11 11234567891011New Horizons:Innovations in Real AssetsBy Sigrid ZialcitaMetaverse and Immersive Technologies:How they Reshape the Real Estate IndustryBy Sofia Sun Generative AI to Usher in a New Digital Era in Real Estate and HospitalityBy Wong Hwee Lim Sustainable Innovations Building Tenant Engagement into a Costed Portfolio Decarbonisation PlanBy Sam Crispin and Nancy Wong Innovative Constructions Assessing the Investment Viability of NewConstruction TechnologiesBy Dr.Deborshi Barat and Vishvesh VikramHow will Electric Vehicles Impact Real Estate in Asia Pacific?By Ada Choi and Royston TohHealthy Workplace and Living:Identifying Investment Potential in Green Buildings,Wellness-Focused Developments,and Sustainable Living EnvironmentsBy Kushalappa KP Benefits of Including Alternative Assets in REIT PortfoliosBy Aashiesh AgarwaalSustainable Innovations District Cooling at Intellion Park,GurugramBy Ritesh Sachdev Beyond Finance:Singapores Industrial AmbitionsBy Bastiaan van BeijsterveldtThe Increasing Importance of Renewable Energy InfrastructureBy Prof.Graeme Newell TABLE OF CONTENTSAPREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSAsia Pacific Real Assets Association Limited(APREA)does not take responsibility for the content and accuracy of articles on this publication.APREA,its respective directors,employees or affiliates do not make any representation or recommendation whatsoever regarding articles in any of the publications.APREA believes the information in the Knowledge Brief publications to be reliable,but we make absolutely no representation or warranty nor accept any responsibility or liability as to its accuracy,completeness or correctness.Nothing in these publications or website should be taken as a recommendation or to take account of investment objectives,financial situations or the particular needs of any reader.Any information is no substitute for the exercise of judgment.Reader should obtain their own expert advice on all matters.APREA accepts no liability for damage suffered as a consequence of our published publications,research,policies or guidance being used to mislead a third party.Copyright 2023 APREA and individual authors.All rights reserved.APREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSNew Horizons:Innovations in Real AssetsAPREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSBy Sigrid ZialcitaAPREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSRecently,innovations in the real estate and infrastructure sectors have gained significant traction,fueled by rapid advancements in digital technologies and the growing emphasis on sustainability targets.These transformative forces are reshaping consumer demands and societal expectations,necessitating a strong reliance on innovation to navigate challenges such as rising inflation,interest rates,and material costs,as well as the evolving landscape in a post-COVID era and the increasing pressure to meet ESG agendas.In this issue of Knowledge Brief,we take a deep dive into innovations that are driving the advancement of our industry.From the integration of immersive technologies and generative AI in real estate operations to the business case for sustainable practices,the articles explore diverse dimensions.Sofia Sun of C&W Services starts our issue with an article on how the real estate sector is undergoing a significant shift,due to the transformative influence of the metaverse and immersive Technologies.These advancements enable efficient property management,immersive training,and seamless integration with blockchain and NFTs.Yet,apprehensions arise over their energy demands and potential repercussions on real-world engagement.Responsible implementation,ongoing innovation,and heightened awareness can contribute to a harmonious blend of technology,striking a balance between the virtual and physical realms.Wong Hwee Lim of CapitaLand Investment(CLI)shares a case study on the rise of generative artificial intelligence(AI),notably ChatGPT,which is transforming sectors such as in real estate and hospitality.From predictive analysis tools,launch of a new Gen AI chatbot for customers,to tapping on machine learning(ML)and computer vision technology to enhance its retail membership programme,CLI is leveraging on AI and ML to sharpen its operations and deliver greater value to its customers and partners.Sam Crispin and Nancy Wong of Savills discuss the business case for sustainable innovation,focusing on environmental aspects in the context of net-zero pathways.They highlight the green premium enjoyed by building owners who prioritize ESG for energy efficiency and green certification,with tenant demand driving this trend.Their article outlines the process of asset decarbonization planning,emphasizing tenant engagement,and concludes by stressing the importance of proactive sustainability efforts for long-term business success.Dr.Deborshi Barat and Vishvesh Vikram of S&R Associates explore the opportunities and challenges faced by sustainable construction in India to meet the demand for new homes.They emphasize the significance of long-term perspectives,eco-friendly materials,and energy-efficient solutions in the construction sector.The article highlights the regulatory environment,green building certifications,and the role of stakeholders,including investors,financiers,and the government,in fostering sustainable building practices.According to Ada Choi and Royston Toh of CBRE,the Asia Pacific region,leading in global electric vehicle(EV)sales,anticipates a surge in public charging points from 2 million to 9-11 million by 2030,prompting real estate owners to address infrastructure needs.The increasing demand for public EV charging infrastructure presents opportunities and challenges for real estate owners,who can strategize by incorporating EV solutions,partnering with Charging Point Operators,and consulting professionals for portfolio optimization.Kushalappa KP of Cushman&Wakefield,India considers sustainable real estate,particularly on identifying investment potential in green buildings,wellness-focused developments,and sustainable living environments.He says that investments in these areas make long-term financial sense as demand for eco-friendly properties rises,and global emissions in construction value chains can be significantly reduced through existing technologies and new financing instruments.Aashiesh Agarwaal of ANAROCK provides an overview of key alternative assets,including student housing driven by global education hubs and in-migration rates,data centers fueled by digitization and 5G technology,warehousing influenced by e-commerce and GST implementation,cold chains supporting temperature-controlled storage,self-storage spaces meeting consumer needs,and healthcare addressing the aging baby boomer generation.These assets underscore the potential for inflation-hedged steady cash flow and diversification in the real estate investment landscape.Ritesh Sachdev of TATA Realty&Infrastructure presents a compelling case study of sustainable innovation in one of their assets.As India grapples with heatwaves,the demand for effective cooling solutions rises,despite only 8%of households owning air conditioning units.Intellion Park,a LEED Platinum-certified development,offers an innovative district cooling system and passive design features,showcasing a sustainable model with high-efficiency chillers and advanced technology integration.Bastiaan van Beijsterveldt of Colliers focuses his lens on Singapore,which is undergoing a transformative shift from its traditional role as a financial hub to an industrial stronghold,diversifying its economy with a focus on high-tech,clean tech,semiconductors,life sciences,and prime logistics.The city-states industrial growth and commitment to advanced technology position it as a one-stop solution for investors seeking diversified opportunities,offshore manufacturing,or involvement in technology and life sciences.Beyond its own development,Singapore plays a strategic role in the broader Asia-Pacific(APAC)region,serving as a nexus for innovation,attracting foreign investment,and influencing sustainable practices in neighboring countries.APREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSFinally,we close the issue with an article from Prof.Graeme Newell of the University of Western Sydney,Australia about the increasing importance of renewable energy infrastructure.The infrastructure sector is undergoing rapid changes,especially with a global focus on reducing carbon emissions,making renewable energy infrastructure a key priority for institutional investors.This shift is reflected in higher allocations and increased sophistication in the language used for renewable energy infrastructure funds.Investors are not only acquiring specific assets and investing in funds but are also engaging in joint ventures,acquiring project developers,and providing debt financing,presenting both challenges and opportunities in the dynamic renewable energy landscape.In conclusion,this issue of Knowledge Brief sheds light on the dynamic landscape of innovation in real estate and infrastructure sectors,addressing key facets such as technology,sustainability,and transformative shifts.As stakeholders navigate challenges and opportunities,these insights provide a comprehensive overview of the industrys ongoing transformation and its pivotal role in shaping a sustainable and innovative future.APREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSAPREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSSigrid is the Chief Executive Officer of Asia Pacific Real Assets Association(APREA).Based in Singapore,she is responsible for overseeing the strategic direction,initiatives and operations of the association across Asia Pacific.Under her leadership,APREA repositioned to an industry trade group focusing on real estate and infrastructure.Prior to APREA,she served as Managing Director of Asia Pacific Research and Advisory Services of Cushman&Wakefield(C&W)from 2010 through 2018,where she was responsible for research,thought leadership,strategy formulation and client management.Before relocating to Singapore,she was based in Washington,D.C.and led C&Ws U.S.research group in the Mid-Atlantic region,overseeing all aspects of market research activities in the Washington,DC;Virginia;Suburban Maryland,Baltimore;and Philadelphia areas.Prior to joining C&W,Sigrid served as a Senior Economist for the National Association of Realtors(NAR).In that position,she developed NARs office,warehouse,retail,multi-family housing,and international research programs.A recognized expert in global economic,public policy and real estate issues,Sigrid is a frequent speaker at industry events.Her commentary on commercial and residential real estate markets is also regularly featured in a wide array of global publications,including the Wall Street Journal,Financial Times,Bloomberg,New York Times and Reuters.Additionally,she has made several television appearances on financial networks and radio such as CNBC,Bloomberg,CNN,National Public Radio and Channel News Asia.SI SIG GR RI ID D ZI ZIA AL LC CI IT TA ACECEO OAPAPR RE EA AMetaverse and Immersive Technologies:How They ReshapeThe Real Estate IndustryDigitalization is reshaping learning,work,and entertainment,with the evolution of the Metaverse as a post-reality universe running in parallel to our physical world.Simultaneously,Immersive Technologies are designed to provide users with deeply interactive digital experiences within this virtual realm.The real estate industry is experiencing a profound transformation propelled by the rise of the Metaverse and Immersive Technologies.These advancements are fundamentally changing how physical spaces are managed,bringing forth a multitude of advantages that streamline operations,engage users,and reduce the environmental impact of physical interactions.APREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSBy Sofia SunAPREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSHarness the Advantages of the Metaverse and Immersive Technologies1.Virtual Property Management:In the Metaverse,Digital Twins,the virtual replica of real-world properties,provide real-time data on a buildings systems,security,and maintenance needs,enabling remote asset monitoring and management.This enhances productivity through its intelligent features.2.Immersive Training:Integration of Augmented Reality(AR),Virtual Reality(VR),Radio Frequency Identification(RFID),Human Machine Interface(HMI)Panel,Global Positioning System(GPS)technologies transcend traditional training methods,ushering in revolutionary training experiences in the industry.Trainees are immersed in lifelike simulations,transporting them to scenarios where they can practice and enhance their skills within a secure and captivating virtual world.This fosters their readiness and confidence in their respective roles while embracing effective and sustainable practices.3.Maintenance Scheduling and Reporting:Incorporating Computerized Maintenance Management System(CMMS)into Immersive Technologies transform maintenance scheduling and reporting.Digital Twins facilitate maintenance scenario simulations,optimize scheduling,and provide predictive asset failure analysis to reduce energy waste.AR and CMMS streamline data collection,delivering data-driven insights while enabling real-time access to work orders to enhance operational efficiency.4.Robot-Ready Buildings:Bridging the virtual world with physical production systems is required to enable digital workplaces and digital learning spaces.Immersive Technologies empower the creation of virtual prototypes within the Metaverse,facilitating the simulation of cleaning and security robots functionality and efficiency within a digital replica of the real-world environment.This methodology ensures that the design and programming of these robots align well with the buildings and occupants specific requirements.Buildings prepared for robot integration can attain reduced energy consumption,waste reduction,and optimized resource allocation,courtesy of the Immersive Technologies that bridge the gap and facilitate the transition to smarter and sustainable facilities,seamlessly integrating the advantages of the Metaverse with robotic automation.5.Blockchain and NFTs Integration:Blockchain and NFT integration in the Metaverse and Immersive Technologies reshape virtual real estate engagement.Blockchains security and smart contracts automate property management,ensuring transparent way of managing data and transactions,while NFTs enable fractional ownership,streamline virtual property records,and enhance efficiency.NFTs can encompass architectural designs and innovative virtual asset presentations,allowing users to trade these assets within decentralized and immutable immersive environments,bridging between real estate and the Metaverse.APREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSMetaverse and Immersive Technology represent lucrative opportunities to positively revolutionize the real estate industry.However,future VR technologies will require a significant amount of energy,and the Metaverse effect could lead to a drop in real-world exploration,which would potentially be harmful to the environment.We must recognize and mitigate these risks to pave the way for a sustainable digital future.Energizing the Metaverse and Immersive TechnologiesEnergy is the essential foundation of technology advancements.The development and application of the Metaverse and Immersive Technologies require substantial energy for their operations.Therefore,ensuring reliable and sustainable energy sources is crucial to avoid aggravating current environmental challenges.Real estate developers can explore different configurations and designs in the Metaverse world and seek feedback,avoiding unnecessary additions and alterations costs during post-construction phase.The Metaverse is a digital universe comprising extensive virtual spaces,social engagements,digital assets,and immersive experiences.A resilient and high-performing IT infrastructure,including data centres and servers,is essential to be energy-efficient,benefiting not only the environment but also elevating the overall functionality of Immersive Technologies in the Metaverse seamlessly.Rising Digital LiteracyAs the Metaverse blurs the distinctions between reality and virtual world,the real estate industry must actively engage in collaborative programs to gain technical expertise and ethical awareness for data privacy and security.This equips them to navigate the digital landscape responsibly and to respect the use of digital spaces of others.APREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSAs the Metaverse blurs the distinctions between reality and virtual world,the real estate industry must actively engage in collaborative programs to gain technical expertise and ethical awareness for data privacy and security.APREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSBalancing Real-World ExplorationThe swift growth of the Metaverse and Immersive Technologies has raised concerns about a potential decline in real-world exploration.Maintaining a connection with physical environments amidst the enticement of the Metaverse is crucial.It requires innovative strategies that merge real and virtual experiences while providing exploration spaces in both realms.These measures can safeguard the significance of the physical world in an ever-expanding digital landscape.landscape.The Metaverse and Immersive Technology offer the potential for an exciting future for the real estate industry,where we can harmonize the virtual and real realm while aligning with sustainability goals.The rapid evolution of the digital landscape accentuates our shared responsibilities as real estate professionals to embrace these transformative tools.One path to achieving this lies in adaptive thinking.We must not fear advanced technologies and recognize they are a double-edged sword.The real estate industry can harness their capabilities for the betterment of our world,fostering a harmonious coexistence between technology and sustainability.SOSOF FI IA A SUSUN NHeaHead d ofof S Sa al les es a an nd d C Cl li ienent t S Sol olu ut ti ionons sC&C&WW SeSer rv vic ice es s SinSing gapapo or re eAs the Head of Sales and Client Solutions,Sofia is responsible for the development and execution of sustainability strategies,fostering client relationships,and working closely with top management and expert teams to drive sustainable business growth.With a strong passion for Sustainability and Engineering Services Support,she is actively engaged in a wide range of ESG projects and oversees the delivery of engineering services.Prior to joining C&W Services,Sofia had a successful career in the ACMV industry.With over 20 years of experience spanning various sectors,including commercial,hospitality,healthcare,finance,retail,and industrial properties,she led sales and services businesses.Her leadership not only resulted in significant growth and profitability but also the adoption of environmental sustainability practices across these diverse industries.APREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSGenerative AIto Usher ina New Digital Era in Real Estate and Hospitality Generative artificial intelligence(AI)has gained significant prominence.Since the launch of ChatGPT by OpenAI in November 2022,the platform swiftly amassed 100 million active users within two months faster than popular social media platforms such as TikTok and Instagram.From 4Q 2022 to 1Q 2023,there was also a remarkable 2040%increase1 in volume of generative AI reports.As interest in Generative AI proliferates and its value proposition become clearer,Generative AI is no longer just a trend,but a revolutionary technology that is here to stay.It is imperative for businesses to capitalise on the benefits Generative AI can offer.It comes as no surprise that Generative AI has also entered the real estate and hospitality sector,and is set to usher a new digital era.Even before the advent of ChatGPT,CapitaLand Investment(CLI),a leading global real estate investment manager,had adopted AI and Machine Learning(ML)in a variety of workflows.Recognising the power of AI and ML to revolutionise the industry,CLIs Data&AI team worked closely with the various business units to develop and implement these innovative technologies.APREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETS1 S&P Global Market Intelligence Investment Research Coverage On Generative Artificial IntelligenceBy Wong Hwee LimFrom identifying investment opportunities to improving business processes and enhancing customer experiences,CLI has used AI and ML in a myriad of ways.This includes creating an index to rank cities worldwide to better analyse their growth potential,as well as a tool to predict future investment opportunities.CLIs retail arm used AI and ML for its lifestyle and shopping loyalty programme,CapitaStar,to create a better experience for its members.To earn reward points,shoppers submit a photo of their receipt from the mall via the CapitaStar mobile app and the ML computer vision technology automates the validation and point awarding process.This significantly enhanced operational efficiency with a cost saving of S$328k per annum and reduced wait time for members by increasing processing speed from 7 days to 30 seconds.APREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSWith Generative AI,the Data&AI team worked with CLIs lodging business unit,The Ascott Limited(Ascott)to create a next generation chatbot.Ascott is one of the first in the hospitality industry to launch a generative AI chatbot.Conventional chatbots execute pre-programmed responses based on specific triggers,lacking the warmth and meaningful engagement that hospitality companies seek to express across all their customer touchpoints.Generative AI enables chatbots to not only draw from a wealth of information,but to recognise and learn.In August 2023,Cubby,a GenerativeAI-powered web chatbot was unveiled.Cubby aims to enhance the travel stages of planning and booking as part of the guest journey.Named after Ascotts mascot,Cubby is designed to play the role of a travel buddy to all guests.Cubby is equipped to provide travel insights including destination highlights,accommodation recommendations,must-visit attractions,suggestions for shopping and adventure,as well as the best Instagram-worthy spots,to name a few.APREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSBefore checking in,Cubby can share travel tips with guests,offering advice on visa requirements,travel budgets and packing checklists.One of Cubbys standout features is its ability to create an itinerary tailored to each guest.Beyond helping guests to save time while planning for a trip,it takes into consideration the interests of guests and curates a detailed itinerary featuring activity recommendations,dining options,and attractions to visit;enabling guests to explore the destinations in their own way.Cubby also serves as a virtual tour guide,offering insights into key landmarks,historical sites,museums,and more.Currently in its test-bedding stage where learning is still key,Cubby is part of Ascotts early mindful adoption of Generative AI driven guest-centric innovations.More hospitality companies are expected to follow in Cubbys footsteps.A comprehensive survey by Hotel Operations revealed that the adoption of cutting-edge technologies has led to improved operational efficiency for 80%of hoteliers.This correlation has prompted 78%of hospitality firms to pledge an increased investment in hotel technology to improve productivity,including the use of Generative AI2.2 August 2023,Acropolium Top hospitality technology trends to embrace in 2023CLI and Ascott built Cubby based on Microsofts OpenAI and Azure Services.Similar to ChatGPT,Cubby is able to leverage real-time data,use Bing search,Azure Map(Nearby API),Azure Map(Weather API)and other Azure services,alongside data and insights accessed via Ascotts global website ,to deliver an improved,tech-enabled guest journey.By utilising the latest Large Language Model(LLM)powered by OpenAI,interacting with Cubby will feel like conversing with a knowledgeable human.More than just the booking of rooms,true hospitality is about providing guests with an immersive and personalised travel experience.With Generative AI,hospitality companies can extend their reach beyond the physical space of the property and continue to meaningfully engage their guests digitally.APREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSThe launch of Cubby is just the first step for CLI in harnessing the latest technology in its operations.Moving forward,CLI aims to expand Cubbys capabilities beyond that of a knowledgeable travel companion and enable guests to complete their bookings directly through the platform.On top of that,CLI plans to roll out a Generative AI chatbotwithin the organisation to act as a policy genie combing through internal human resource policies to quickly and accurately generate responses to any queries its staff may have.Meaningful long-term adoption of Generative AI requires everyones buy-in and commitment.As CLI powers up on its technological initiatives and drives an even deeper level of innovation,it is key that CLIs staff are brought along on this journey.Plans are in place to develop certified courses and provide training to upskill its staff,to harness the latest technology to its fullest potential.This commitment to leveraging the power of Generative AI enables CLI to remain at the forefront of the real estate investment management industry and deliver sustainable value to its stakeholders.WOWON NG G H HWWE EE E L LI IMMHeaHead d ofof D Di ig gi it ta al l In Int terern na at ti ionona al lCaCap pi it ta aLaLan nd d I In nv ve es st tm me en nt tMr Wong Hwee Lim is the Head of Digital International at CapitaLand Investment.He is responsible for planning and executing CLIs digital strategy.He manages the technology requirements of CLIs global business stakeholders,implements digital solutions and the latest technological innovations such as data analytics and artificial intelligence to drive business outcomes.With Generative AI,hospitality companies can extend their reach beyond the physical space of the property and continue to meaningfully engage their guests digitally.Sustainable Innovations Building Tenant Engagement into a Costed Portfolio Decarbonisation PlanThe business case for sustainable innovationWe are all well versed in environmental,social and governance(ESG)by now and it offers no end of jargon and acronyms to keep conference organisers and their attendees busy.Lets assume that the S and G are largely taken care of under existing CSR and compliance functions and focus on the E.The E for environmental also stands for energy and efficiency.This focus on EEE,we might mischievously call E3,is also the nuts and bolts of a net zero pathway which is the overarching ambition set out in occupier corporate sustainability targets.This is all encapsulated in organisations including the Net Zero Asset Managers Alliance,the Net Zero Asset Owner Alliance,the Net Zero Banking Alliance,the Climate Neutral Data Centre Pact,the Net Zero Lawyers Alliance and others which bring asset owners,manager and occupiers into the E3 fold.This is increasingly important with looming net zero target dates.Tenants with a 2030 net zero target only have time for one more office relocation to establish the lowest operational carbon footprint they can.This takes on even more importance in Asia Pacific where renewable energy tariffs are so few.APREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSBy Sam Crispin&Nancy WongAPREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSBuilding owners that focus on ESG to drive energy efficiency and deliver on their green building certification targets can be seen to enjoy a green premium.This is seen across the region but the figures should be approached with caution,the greenest buildings also tend to be the newest which skews the data.The existence of the green premium is supported by tenant demand for offices that support their net zero pathway.There is also evidence that brown assets are being left stranded by the economic slowdown in European markets where tenant demand is lower but refinancing is no longer easy.The case for Asian developers,asset managers and others to develop a portfolio decarbonisation plan is a compelling part of their future proofing strategy.To many regional building owners,this process is a sustainable innovation.APREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSAsset decarbonisation plansA decarbonisation plan begins with a realistic assessment of the individual assets within the portfolio.Energy audits provide the data to enable deeper analysis,which together with building management interviews,provides the basis for an individual asset plan.Identifying which assets can be cost effectively upgraded to meet the local green certification standards and understanding exactly how for this goes to drive energy efficiency in particular enables prioritisation.Usually,the building managers will have a good idea of where their assets sit on the shades of green spectrum and what M&E upgrades are needed to improve energy performance.Comparing building sustainability performance to the relevant points scoring system for the green certification standard identifies particular gaps for additional focus.This can then be matched to available incentive schemes for existing buildings,such as the Singapore Green Mark Incentive Scheme for Existing Buildings 2.0(GMIS-EB)or similar.The prioritised roadmap for decarbonisation can be integrated into the existing maintenance plan to adjust the long-term CAPEX plan as an essential part of linking financial planning to ESG disclosures.It enables stakeholders to understand the investment required and the rationale behind it as well as the expected results.Forecasting OPEX savings can then be compared to costs of achieving them.So far so good.Much of this work can be done by the asset owner with support from professionals where needed.For those ready to take it a step further,decarbonisation is far more effective when the occupiers are on side,this is the case for tenant engagement.The approach may be tailored differently for multi-tenant buildings and single-tenant buildings but the overall direction is the same.This can lead to“voluntary environmental partnerships”between landlord and tenants which may be tied up in a green lease or more likely set out in a non-binding addendum to the lease with additional requests and requirements including in a sustainable fit out guide or occupiers handbook.APREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSThe case for tenant ESG engagement is a strong one and goes beyond regular tenant satisfaction surveys.This involves knowing your tenant;their sustainability strategy and priorities will be easy to find for most listed companies and a trained eye can quickly assess where they are on their sustainability journey.Chances are Net Zero 2025 or 2030 for scope 1 and 2 will be among the targets,this means office operational energy efficiency is a high priority.If its a service industry business it will be their top priority,if they are a manufacturing company then manufacturing and transportation related energy will be more important.Knowing your tenant informs the tenant engagement agenda.Having the conversation means retooling the leasing team to have those ESG discussions.Many corporate occupiers have an ESG champion,probably reporting to the CFO or COO.Building sustainability actions into regular tenant engagement helps maintain a relationship that could save the landlord from losing a tenant.In slowing markets,that alone makes it worth the effort.Corporate sustainability agendas can be very broad.The basics may be in place,but how many of us have a“bird strike remediation plan”?Probably not a deal breaker but if it comes up,its better to have a plan.Likewise a 100%LED lighting policy,just having the lighting installed is one thing,having a policy in place and evidence to support implementation puts the building owner a step ahead of rivals.APREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSWhat next?In brief,setting a decarbonisation plan to,say,have“100%assets green certified and implement all available energy efficiency measures by 2030”means evaluating the portfolio,setting individual asset plans for short,medium and long term,estimating OPEX savings,budgeting for CAPEX,getting board approval and implementing the plan.Depending on the circumstances,a competitor or peer review and benchmarking study may inform the process.Putting measureable plans into actionable policy means writing up the 100%LED Lighting Policy,the Single Use Plastics Free Policy,volunteering activities and the Bird Strike Remediation Plan.Having all these things in place demonstrates commitment and gives the tenant confidence to go to head office for the relocation plan approval.Head office approval possibly already mandates such things from the tenants side.ConclusionThe green premium comes in different shades of green,maximising it takes a bit of sustainable innovation.With increasing reporting requirements,many of these actions are going to be taking place anyway.Taking a proactive approach to build sustainability,and decarbonisation in particular,just makes good business sense.APREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSSASAMM C CR RI IS SP PI IN NHeaHead d ofof S Su us st ta ai in na ab bi il li it ty y a an nd d E ES SG GSaSav villsills,A As sia ia P Pacacif ific icSam Crispin is Head of Sustainability and ESG for Savills,Asia Pacific a blended role that combines Savills internal ESG reporting with sustainability advisory services for Savills clients across the region.His interest in sustainability dates from 1992.NANANCNCY Y WWO ONGNGSeSen nio ior r MMananagage er rSaSav villsills R Re es se eararc ch h&C Co on ns su ult ltananc cy y,A As sia ia P Pacacif ific icNancy Wong is a senior manager of Savills Research&Consultancy,Asia Pacific.She researches commercial property market trends across the region and produces a range of thought-leadership papers on topical issues.Innovative Constructions Assessing the Investment Viability of New Construction Technologies To meet the annual national demand for 10 million new homes,there are significant opportunities for establishing new climate-responsive construction techniques in India.A key element of sustainable construction is the factoring in of long-term perspectives such as a buildings complete lifecycle,including through the use of eco-friendly material(e.g.,recycled steel/concrete,bamboo,reclaimed/engineered wood,cellulose,recycled fiberglass,biodegradables,low-emission paint,natural stone,etc.).APREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSRelatedly,energy-efficient solutions can help,such as cool roofs(designed to reflect more sunlight),green insulation(e.g.,by using expanded polystyrene),solar panels,smart appliances(e.g.,LED lighting;heating,ventilation and air conditioning(“HVAC”)systems,etc.)and water-saving fixtures(e.g.,low-flow faucets).By Dr.Deborshi Barat&Vishvesh VikramAPREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSBRSRReporting investments and capital expenditure in green and/or energy-efficient buildings can significantly improve ESG ratings and reduce future capital costs,including under the reasonable assurance-driven reporting regime(“BRSR Core”)introduced by the Securities and Exchange Board of India(“SEBI”)as a subset of the wider Business Responsibility and Sustainability Reporting(“BRSR”)framework.Regulatory EnvironmentUnder the Energy Conservation Act,2001(the“EC Act”),the Energy Conservation Building Code(“ECBC”)is an initiative pursed by the Bureau of Energy Efficiency(the“BEE,”under the Ministry of Power).The recent Energy Conservation(Amendment)Act,2022(the“EC Amendment”)has further expanded the regulatory scope of the EC Act to include large residential buildings and enhanced the ECBCs coverage.Green Buildings:Opportunities and ChallengesEmerging evidence highlights the higher value and reduced risk associated with green buildings compared to standard structures.New constructions also offer a significant opportunity to integrate energy efficiency into building design from the outset rather than risking expensive retrofits later.Constraints include perceived high construction costs,misalignment of incentives and benefits,and the disparity between short hold periods with respect to real estate assets in portfolios.On the other hand,long building lifespans,with potential for stricter regulations in the future,pose a different set of concerns.Indeed,across both residential and commercial sectors,green buildings offer immense investment potential.Globally,markets are increasingly focused on sustainability,climate change,and environmental,social and governance-related(“ESG”)priorities.Understanding the cost of pursuing these goals is useful,given Indias appetite for both residential and Grade A commercial/industrial properties.The global shift towards sustainable development has led to a preference for green-certified commercial buildings among occupiers and developers.According to a JLL study conducted last year across major Indian cities,over two-fifths of Grade A office stock already holds green certifications,with projections to exceed 50%in the next decade.Additionally,nearly three-quarters of new supply is expected to be rated green,while older projects are likely to undergo upgrades to reduce their carbon footprint.According to a JLL study conducted last year across major Indian cities,over two-fifths of Grade A office stock already holds green certifications,with projections to exceed 50%in the next decade.APREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSDespite these challenges,however,there is growing market demand for energy-efficient buildings in India.Local developers are realizing that the additional capital expenditure(“capex”)can be offset by long-term operational cost savings.Another major innovation in the construction sector that champions sustainable buildings is prefabrication(“prefab”).Prefab technology uses cutting-edge construction methods to produce building modules offsite,later transported and assembled onsite.Both temporary and permanent modular constructions are part of a wider trend towards embracing innovation within this sector.The obvious advantages of modular construction,including the reduction in waste and effluents,are likely to fuel demand in both residential and commercial real estate space.APREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSInvestors and FinancersReal estate financers and investors can play a significant role in influencing the market for sustainable buildings.Commercial bank lending,including construction finance,mortgages,and green financial products,can accelerate green building adoption,along with lower interest rates and longer tenors.As a result,such banks can diversify their client base and product offerings,build higher-value and lower-risk portfolios,and access new sources of finance through green bonds,green securitizations,and green credit facilities.Institutional investors participating in green real estate can inject liquidity into the market,enabling primary lenders to free up capital to develop new green lending products.Multinational development finance institutions(“DFIs”)like the International Finance Corporation(“IFC”)can catalyze markets and attract private investors,including foreign ones.DFIs offer financial products,technical support,and capacity-building programs to develop enabling environments.GovernmentThe government can encourage sustainable building investment by mandating building codes which ensure that green measures are incorporated from the beginning.Fiscal incentives such as tax breaks,grants,subsidies,loans and rebates,coupled with non-fiscal incentives like expedited permits,can further drive green building adoption.Certain Indian states have revisited the National Building Code of India,2016,to align it with their respective sustainability goals.Haryana,for example,incentivizes projects rated by Green Rating for Integrated Habitat Assessment(“GRIHA”)/Indian Green Building Council(“IGBC”)/Leadership in Energy and Environmental Design(“LEED”)by awarding projects through additional floor area ratios(“FAR”)in respect of all building use,except plotted residential.Building CodesThe EC Amendment has introduced sustainability considerations into the building code,providing norms for the use of renewable sources and green buildings.The new code will apply to office and residential buildings,subject to specific criteria.Emerging ESG trends globally encourage multinational companies looking to lease or establish offices in India to prioritize green energy and sustainability ratings,motivating Indian developers to incur additional capex to procure such ratings.As such,the existing framework does not provide any specific guideline for regulating innovations in sectors such as modular construction.Rating SystemsVoluntary green building rating systems like LEED,GRIHA and IGBC have seen some success,especially driven by green policies among large companies.Unlike the United States,India lacks a mandatory green construction code or green building standards.However,LEED is widely recognized by Indian developers,and GRIHA serves as the national rating system,evaluating buildings based on environmental performance.The Way ForwardDigitalization offers various new opportunities,such as in respect of efficient space cooling.Government policies should consider emerging digital technologies to enhance sustainability in building energy services,such as through the increased use of smart thermostats.However,digitalization raises concerns about data security,privacy,along with technical and economic considerations.Addressing additional capex requirements is also essential due to the growing demand for Grade A assets with appropriate green energy ratings.APREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSDRDR.DEDEB BO OR RS SH HI I B BA AR RA AT TCoCou un ns se el lS&S&R R A As ss so oc cia iat te es sDr.Deborshi Barat is a counsel at S&R Associates and is based in the Firms New Delhi office.His areas of practice include regulatory and policy matters,including data protection and ESG.He is also involved in the Firms knowledge management initiatives.Prior to joining S&R,Deborshi was an Associate Professor at the Jindal Global Law School.Deborshi received a B.A.,LL.B.(Hons.)in 2008 from the National University of Juridical Sciences,Kolkata and an M.A.in Law and Diplomacy(2015)and an LL.M.(2016),respectively,from The Fletcher School,Tufts University.He also holds a Ph.D.from Fletcher(2022).VIVIS SH HVEVES SH H VIVIK KR RAMAMAsAss so oc ci ia at te eS&S&R R A As ss so oc cia iat te es sVishvesh Vikram is an associate at S&R Associates and is based in the Firms New Delhi office.His areas of practice include mergers and acquisitions,private equity and general corporate matters.Vishvesh received a B.A.,LL.B.from National Law University,Delhi in 2021.How will ElectricVehicles Impact RealEstate in Asia Pacific?APREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSBy Ada Choi&Royston TohAPREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSThe global electric vehicle(EV)market has experienced supercharged growth in recent years,and it is in Asia Pacific that this growth has been felt most significantly,with the region accounting for nearly two-thirds of global EV sales in 2022.As EV adoption continues to gather pace,demand for public charging infrastructure in Asia is also rapidly increasing.Almost all markets in Asia Pacific plan to phase out the sale of new internal combustion engine vehicles over the next two decades.The growing number of EVs in Asia Pacific will require a significant increase in charging facilities.CBRE estimates the number of public charging points across the region will rise from around 2 million in 2022 to around 9-11 million by 20301.These converging trends require real estate owners and investors to respond and formulate a plan to provide EV public charging infrastructure.1 https:/ Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSAsia Pacific leading the way in EV sales growthThe accessibility of vehicles and charging infrastructure saw EV sales take off in 2020.According to the International Energy Agency,global sales of EVs tripled in the space of two years to hit 10 million in 2022,with Asia Pacific accounting for almost two-thirds of this figure.Mainland China has become the biggest market globally for vehicle sales,buoyed by government policies including subsidies and tax incentives,along with the rise of domestic brands.This growth momentum is set to continue,with the International Energy Agency forecasting annual global electric car sales to more than triple to 37 million by 2030.Despite these encouraging growth trends,EVs accounted for just 14%of passenger car sales and 2.1%of total passenger car stock worldwide in 2022.Hong Kong SAR is at the forefront of adoption in Asia Pacific,where EVs accounted for 53%of overall vehicle sales in 2022.Excluding Hong Kong SAR and mainland China,EVs accounted less than 2%of existing vehicle stock in Asia Pacific as of the end of 2022.This low base indicates significant room for growth in the EV industry,especially as almost all markets in Asia Pacific plan to phase out the sale of new internal combustion engine vehicles,the bulk of which comprise passenger cars,over the next two decades.Increasing demand for public charging infrastructureWith EV adoption increasing,so is demand for public charging infrastructure.This demand is relatively stronger in Asia than other regions due to the prevalence of apartments where the installation of private chargers is subject to regulatory restrictions and administrative barriers.In markets where people live in landed houses,private chargers can easily be installed at home.As of the end of 2022,there were 2.7 million publicly accessible charging points worldwide,equivalent to one for every 10 EVs.Interestingly,over 80%of public chargers are in mainland China and Korea.CBRE estimates the number of public charging points across Asia Pacific will rise from around 2 million in 2022 to around 10 million by 2030.The bulk of new charging points will be in mainland China,which will account for around 70%of the total.Other growing markets include India,which will see the addition of 1.5 million new chargers.Other mature markets will experience significant growth,while growth in the Pacific region is expected to be slower as private charging remains the norm.APREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSFrom retail malls and office complexes to industrial warehouses,EV charging infrastructure is fast becoming the norm across Asia Pacific as landlords and occupiers gear up for the electric mobility era.CBRE expects the introduction of regulatory requirements to hasten the installation of charging points in new office buildings.For example,Australia now requires new office developments to provide charging points in 10%of car parking spaces.Singapore and major Indian cities such as New Delhi and Pune have adopted similar regulations,with Tokyo set to introduce measures in April 2025.In addition to statutory requirements,several issuers of green building certificates have incorporated EV charging infrastructure into rating systems.Furthermore,EV chargers are becoming more common in shopping malls,and there is strong potential for fast chargers in industrial and logistics facilities.More chargers are also needed in transport hubs such as motorway service stations.APREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSThe way forward for real estate owners and investors While increasing demand for public EV charging points presents opportunities,there remain certain challenges for landlords and investors to address.In addition to potential constraints on building specifications,they need to consider ensuring sufficient power supply and safety measures for charging points,the longer payback period for charging points,and the fast-evolving technological advances that could shorten product lifecycles and erode demand for physical charging points.With this in mind,landlords and investors should seek to future-proof their real estate by incorporating EV charging solutions into new projects at the design stage,assessing the feasibility of augmenting existing car parking facilities with EV charging infrastructure,and enhancing power grids,safety standards and other building features to accommodate future upgrades.Real estate owners and investors can consider partnering with Charging Point Operators(CPOs)and/or EV manufacturers,which can enhance the ease of operation and maintenance,and can help landlords secure a steady revenue stream from rents charged to CPOs.Other options to gain access to EV charging infrastructure include installing self-built charging points,or investing in CPOs.The commercial real estate industry continues to play an integral role in the development of public charging infrastructure for EVs.To best capitalise on the growth opportunity,CBRE recommends that landlords and investors engage professional consultants to formulate strategies to expedite the installation of charging points in their portfolios,and to determine optimal charging solutions.Commercial real estate solutions for public charging pointsAPREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSADADA A CHCHO OI IHeaHead d ofof OcOcc cu up pi ie er r ReRes se ea ar rc ch h,APAPA AC C;HeaHead d ofof DaDat ta a In Int tel ell li ig genenc ce e AnAnd d MaMan na ag ge ememen nt t,APAPA AC CCBRCBRE EAda Choi leads CBREs occupier research in Asia Pacific and also oversees data strategy for the region.Since joining CBRE in 2005,Ada has held a variety of leadership roles,including head of capital markets research for Asia Pacific and head of research for Greater China.Prior to joining CBRE,Ada worked in financial markets research for the Hong Kong Exchanges and Clearings Planning and Research team,where she led research into financial market development trends and benchmarking Hong Kong against other leading global financial centers.Ada is a Chartered Financial Analyst and a member of the Hong Kong Society of Financial Analysts.APREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSROROY YS ST TO ON N T TO OH HSeSen nio ior r D Dir ire ec ct to or r,A AP PA AC C SaleSales s anand d SoSolu lut tio ion ns s,SeSec ct to or r DiDir re ec ct to or r f fo or r E En ne er rg gy y&R Re es so ou ur rc ce es s|I In nd du us st tr ri ia al l&L Lo og gi is st ti ic cs s,GWGWS S EnEnt te er rp pr ris ise e P Pr ro oje jec ct t MMananagage em me en nt tCBRCBRE ERoyston leads APAC Sales and Client Solutions for CBRE Enterprise Project Management(PJM)and helps to expand the PJM business by focusing on new and existing client accounts growth.He is a seasoned project manager and has held numerous Program Management Office Lead roles for clients across industries and sectors.He is also the Sector Director for Energy&Resources and Industrial&Logistics for Asia Pacific.Within CBRE,he runs the PJM operations across Asia Pacific,providing training,onboarding,governance audits for the PJM business and is instrumental in formulating project templates and processes.Royston is a qualified Quantity Surveyor registered with the Singapore Chartered Institute of Building.Healthy Workplace and Living:Identifying Investment Potential in Green Buildings,Wellness-Focused Developments,and Sustainable Living EnvironmentsSustainable real estate(green buildings&wellness-focused developments)are an investment opportunity that offers numerous benefits both to investors and the environment.Enabling sustainability in our built environment will result in community well-being for ourselves today and future generations of tomorrow.The domain of green buildings&wellness-focussed development aligns with the growing adoption of socially responsible investing(SRI),with the joint objective of generating higher returns and enabling positive social influence and environmental impact.Investment into this domain would make financial sense over the long term,as demand&end-user preference for eco-friendly properties continues to rise and regulations tighten around carbon emissions standards.Therefore,investments made now by individual investors&entities into this domain,will observe considerable increase in value over their investment period.APREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSBy Kushalappa KPAPREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSAs per IFC Report,construction value chains(including operation of buildings and materials such as steel and cement)account for approximately 40 percent of energy and industrial-related CO2 emissions globally.Projected emissions growth in construction value chains can be reduced significantly(even below 2022 level,by as soon as 2035)with the application of existing technologies,new financing instruments,and the implementation of appropriate policies.Global private debt financing for decarbonizing construction using green financial instruments reached a record high in 2021 of about$230 billion,but emerging markets only issued about 10 percent of that total.With proper policies and regulations in place and adopting commercially available technologies in construction value chains,IFC estimates the investment potential for new private investments at$1.5 trillion in greener buildings in emerging markets(and$2.0 trillion in high income markets),over the next decade.These indicate a favourable investment scenario potentially panning out for investors in the sustainable green assets domain.The concept of Green Buildings goes beyond the goal of minimizing their environmental impact(reducing or eliminating the negative impact on environment and climate).In fact,it goes into consideration of end-user health and well-being,thereby comprising a more holistic domain which encompasses wellness-focussed developments and sustainable living environments(neighbourhoods,communities&capacity/skill building).Identifying investment potential therein,would then mean that its just not only about green building and its constituents(design,construction,operations&extending to raw material sourced embodied carbons),but also about the surrounding ecosystem(socioeconomics,evolving workplace&lifestyle and geo-political occurrences)and their influencers on investment potential of green buildings.APREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSFrom an Investment Potential Perspective,the assessment framework for Green Buildings would comprise of:I.Development framework(retrofit,design&build it right);II.Financial framework(liquidity,instruments,tenure,cost of capital&return on investment);III.Regulatory,legal&incentives framework(policies,building/energy codes&taxes/subsidies)IV.Certifications framework(ratings&programs);V.Surrounding ecosystem(VUCA World);which also needs to be assessed for ascertaining investment potential&sustenance of short term/long term returns.The afore-mentioned five assessment framework components have been further elaborated to enable identifying investment potential within green buildings,wellness-focussed developments and sustainable living environments:It would be optimal to assess the impact(on a case-to-case basis)of sustainability measures on cost&return(new construction or retrofitting of projects),considering the numerous factors that tend to influence/impact each project:oPotential savings in development cost(due to improved practices&technologies)oReduction in operating cost(better efficiency)oAchievable rental/sales premiumoLower vacancy rates oFaster sales cycles oReduced legal liabilities&reputational risks due to:compliance with evolving standards,preparedness to tackle energy shortages/restrictions,due to increased urbanisation&climate change The performance of the sustainable green assets will need to be measured for each of the above components and compared against anticipated higher cost of investment and technology redundancy risks.Lower operating costs for green buildings,when compared with traditional buildings has been prevalent due to higher efficiency within green buildings.oAs per IFC,one of its main criteria for defining green buildings is atleast 20%more energy efficiency when compared with baseline buildings without energy efficient design&technologies incorporated.Presence&activity of institutional investors in the sustainable assets domain is vital,considering:oLonger holding capacity which can inject liquidity,to replace primary lenders(Banks&Financial Institutions)within green asset portfolio,thereby free up primary lenders capital for re-investment or newer lending products in this domain.oBoth institutional investors and financial intermediaries can also release new financial instruments&credit channels,in emerging markets to stimulate investment growth by private investors.APREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSImplementation of fiscal&non-fiscal measures,such as property tax incentives,grant provisions,technical assistance at a regional level and expedited or reduced permit processes at a city/local level can encourage faster adoption of green initiatives by investors/owners/market stakeholders and enable broader ecosystem to facilitate volume growth in this domain.Global certification&rating systems such as BREEAM,DNGB,LBC,EDGE,GRESB,LEED,WELL are prevalent and accepted widely by the market stakeholders.In many countries,locally developed rating systems(such as Indian Green Building Council,Green Building Council South Africa,Green Building Evaluation Label China),operate as corresponding enablers for portfolio of green assets.These systems help expand the green assets market through evaluated benchmark reporting(as against business-as-usual),and providing third-party verification of green assets.Prevalence of mandatory building codes can ensure that green measures are incorporated from the outset and facilitate broader market awareness.Non-compliant buildings could become subject to legal action and fines,making them more expensive to operate,insure and harder to lease/sell.Inefficient assets run the risk of losing their value or becoming redundant assets due to increasing compliance expectation with regulations to manage and disclose climate risks.Existence of clear definitions and metrics of what constitutes sustainability measures are integral to the efforts by market intermediaries to positively influence investment&growth in volume of green assets.These definitions&metrics also enable collection&reporting of green asset scale&performance,thereby enabling necessary transparency&dissemination of credible information within the industry/domain/region.APREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSPrevalence of ratings&certifications for buildings and appliances can help ensure compliance with green standards,stimulate the market for energy-efficient technologies,and generate market data(measure,verify&compare)to help financial intermediaries select efficient buildings to invest in.Programs(by institutions&industry bodies)to familiarise and train industry personnel and professionals can enable familiarity of concepts&theories,enable learning&innovation,sharing of experiences&skill sets,leading to a much broader adoption of sustainability measures and growth in volumes of return yielding portfolio of green assets.Entities&Employees alike are seeking to experience high quality workplaces&lifestyle indulgence.Added to this,the elements of employee well-being,diversity,equity&inclusivity(DEI)are also complimentary to the holistic shift towards an aspirational workplace&lifestyle.Accordingly,developments which are incorporating these elements&design/layout features both at a campus level and building level,will be able to command higher acceptance&preference by end users.Regional/local business environment,workplace&lifestyle dynamics(work culture/practices,diverse space usage requirements,amenities&facilities,technology adoption,commute time&mode of commute,retail&entertainment preferences,healthcare&schooling preferences,amongst others)will also have to be considered by investors,in tandem with geo-political&economic influencers,in assessing the investment potential of sustainable assets.Certain challenges exist within the sustainability domain,which are being constantly addressed/solutioned,in order to mitigate potential downside investment risk:oObsolescence of technology and re-investment required for upgrading or adopting new technologies can lead to apprehension of cost-prohibitive budgets.oPotential adoption risk of new raw materials or technologies(considering one of the first movers within the sustainability domain),for fear of failure in achieving desired performance levels.oLimited availability of suitable raw material(reduced embodied carbons)&technologies in certain regions/locations,to enable adoption.APREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSNew developments will need to comply with constantly evolving standards/expectations and existing developments will need to be retrofitted to benchmark with upgraded standards.Realisation of higher returns and full investment potential of sustainable assets is expected to only increase going forward(into the future),with continuously evolving technologies,governments setting higher sustainability ambitions,decarbonisation standards becoming stricter and wider cohesive habitat(materials,talent&experience)also expected to fall in place.oIncidence of higher upfront costs for not just constructing new buildings and/or retrofitting older buildings but also reducing reliance on non-renewable energy/material sources,in order to be reduce/minimise overall environmental impact.oLack of alignment of financial incentives and returns,considering relatively shorter holding period(7-10 years)for assets within investor/owner portfolios and the longer lifespan(50-80 years)of buildings.In certain instances,longer gestation period for investment returns,can also deter potential investor activity in this domainAPREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSAbbreviations:IFC:International Finance CorporationLEED:Leadership in Energy and Environmental Design certification&rating systemEDGE:Green building certification system.An innovation of IFC,a member of World Bank Group BREEAM:Science-based suite of validation and certification systems for sustainable built environment.WELL:The WELL Building Standard is third-party certified by the Green Business Certification Incorporation(GBCI),which administers the LEED certification program and the LEED professional credentialing program.DNGB:which is short for Deutsche Gesellschaft fr Nachhaltiges Bauen)is a buildings certification&sustainability rating systemLBC:The Living Building Challenge is an international sustainable building certification program GRESB:Global Real Estate Sustainable Benchmark is an independent organisation providing validated ESG performance data and peer benchmarks VUCA:Volatile Uncertain,Complex,Ambiguous originally coined phrase in 1987,towards the end of the Cold-War.Credit&Acknowledgement for Information Source:IFC Report on Building Green,2023 IFC Report on Building Green in Emerging Markets,2019APREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSKUKUS SH HA AL LA AP PP PA A K KP PDiDir re ec ct to or r&P Pr ra ac ct ti ic ce e H He ea ad dToTot ta al l WWo or rk kp pl la ac ce e&WWo or rk kf fo or rc ce e A An na al ly yt ti ic cs sStStr ra at te eg gic ic C Co on ns su ult ltin ing gCuCus sh hm ma an n&WWa ak ke ef fi ie el ld d,I In nd di ia aKushalappa KP is an experienced consultant(19 years)in the domain of strategy&advisory,having serviced multi-segment clientele including corporate office occupiers,real estate developers,landlords,private equity funds,industrial&logistics firms,infrastructure firms,banks,retailers,government/quasi government bodies,educational institutions,trusts/society with exposure in multiple cities across India.Kushalappa focuses on value optimization and maximization strategies in the corporate real estate sector.He is involved in identifying new opportunities,improving efficiencies and strengthening C&Ws presence in the Office Space Occupier segment in India.Kushalappas expertise lies in CRE advisory providing specialized services for macroµ aspects of core&non-core corporate real estate strategy.He has extensively worked on innovative/diverse assignments in space expansion/consolidation strategy,workplace strategy,change management advisory,location/entry strategy advisory,talent assessment&analytics,DEI interventions in workplace,and portfolio space optimization.Benefitsof Including Alternative Assets in REIT PortfoliosTechnological innovations bring with it demand for newer products and services.It also brings with it newer ways of doing business,which offers superior value proposition compared to hitherto practised business models.These inflection points present significant opportunities to create new businesses at scale,along with the attendant value creation.Such opportunities may also require significant investments at a reasonable cost,often necessitating financial innovation,giving rise to alternative investment opportunities.These investments have varying drivers for value creation,and hence they provide benefits of diversification.This is also seen in a lower beta compared to conventional REIT assets.APREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSBy Aashiesh AgarwaalThe recent years have seen emergence of megatrends in how people are living,working and consuming information and content.This has spawned many such alternative asset classes like REITS on data centres,student housing,warehousing,self-storage spaces,healthcare and cold chains,among others.As you would note,these asset classes are diverse and,as we shall examine shortly,have differing demand drivers and cash flow profiles.Correspondingly,they vary in terms of their systematic risk compared to the mainstream investment opportunities like office or retail REITS,entailing significantly lower Beta.This results in them providing healthy diversification benefits for portfolio managers.Overview of the key alternative assets:Student housing:Student housing or Purpose Built Student Accommodation(PBSA)is a sector which is attracting much interest from investors globally,given the shortfall in adequate student housing owing to strong demand.The driving reasons,however,differ from region to region.While global education hubs are seeing demand due to influx of immigrant students,markets like India are seeing demand owing to high in-migration rates from students seeking to pursue higher education and lack of campus facilities and inadequately planned spaces which are some of the markers of unorganised and poor quality facilities.Further,good quality PBSA offers additional benefits like common age group,community,shared high quality amenities,convenience in commute,and assistance in day-to-day activities.These make PBSAs a compelling value proposition for students.Data Centres:Data centres continue to post robust growth driven by increasing digitisation of corporate operation and increased streaming and internet usage.Further,roll-out of 5G technology is driving the industry as it brings with it data hungry technologies VR/AR,digitised logistics,precision farming and remote healthcare,among many others.However,given the energy intensity and cooling requirements of the industry,there is an increasing pressure from customers,investors and regulators to increase energy efficiency and reduce environmental impact.Warehousing:Warehousing was considered a boring asset class till a decade ago with its growth tracking the overall GDP growth.However,the rise of e-commerce triggered a shift with preference to locating warehouses closer to consumption areas.Further,this trend also led to a downward pressure in retail assets.In markets like India,this trend has seen a further boost owing to implementation of GST,shift of the logistics industry from unorganised to organised and rise of third-party logistics.Well planned and well managed modern warehouses provides shared facilities that improves the overall employee convenience and benefit,thus helping tenants attract and retain employees.Further,larger warehouses owned and managed by single landlords are better positioned to be ESG compliant compared to unorganised warehouses or those held by multiple landlords.APREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSCold chains:Cold chains are expected to continue its growth driven by increasing demand for temperature controlled storage and transportation across industries like food,pharmaceuticals,and chemicals.Globalised trade and supply chains has necessitated the need for supporting cold chain infrastructure,such that temperature-sensitive products are maintained at the required temperature during the transportation and storage.Advent of IoT/5G technology is also helping improve the reliability of the cold chain by allowing real time monitoring of temperature and humidity.Increased reliability is likely to support the industry growth as the risk of spoilage and waste gets reduced.Like data centres,cold chains also has environmental and climate change implications from the energy intensity to leakage of refrigerant gases.However,it has been argued that reduction in methane emissions and reduced food wastage more than offset the greenhouse emissions of the cold chain.Self-Storage spaces:Self-storage properties are small warehouses with multiple units that range in size.Owners lease storage units in these buildings to businesses and individuals that need space to store inventory or household items.The demand drivers for this sector are relocation,decluttering,increased house prices/rent,changing life circumstances and business purposes.Given the retail nature of consumers and relatively shorter duration of the customer requirement,compared to say,an office,data centre or warehouse,the rents tend to reprice themselves quicker to prevalent market trends as compared to offices or warehouses.Healthcare:According to NAREIT,health care REITs own and manage a variety of health care-related real estate and collect rent from tenants.Health care REITs property types include senior living facilities,hospitals,medical office buildings and skilled nursing facilities.Healthcare REITs may further include outpatient facilities,medical offices and life science innovation and research properties,among others.One of the key demand drivers of these assets is the aging of the baby boomer generation.APREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSDivergent drivers provide excellent source of diversification while providing inflation hedged steady cash flow prospectsREITs,by its inherent nature,provides stable cash flows to investors.Furthermore,they provide excellent inflation protection over long term.However,as an investor,you are still exposed to risk in volatility of market prices.Alternative assets,as already discussed,have their cash flows underpinned by economic drivers varying as compared to the mainstream assets like offices and retail assets.This causal relationship is also well expressed in the measure of beta for alternative assets,office assets and retail assets using the capital asset pricing model.A basic regression of 10 key office REITs,retail REITs and of 12 alternative asset REITs on S&P 500(results in chart:Alternative REIT Assets have lower systematic risk compared to mainstream REITs)substantiates the diversification benefits that alternative assets can provide to a portfolio of REITs.Chart:Alternative REIT Assets have lower systematic risk compared to mainstream REITsAPREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSAASAASH HI IE ES SH H A AG GARARWWAALAALSeSen nio ior r V Vic ice e P Pr re es sid ide en nt t ReRes se ea ar rc ch h a an nd d I In nv ve es st tm me en nt t AdAdv vi is so or ry yANANARARO OC CK K C Ca ap pi it ta al l AdAdv vi is so or rs s P Pr ri iv va at te e L Li im mi it te ed dAashiesh Agarwaal is working with Anarock Capital Advisors Private Limited covering Capital Markets Research and also advises clients on acquisition and disposition of assets and capital in the India real estate space.You can read Aashieshs report on PE activity in Indian real estate on https:/bit.ly/3SpDx1dand his work on impact of Insolvency and Bankruptcy Code on real estate on https:/bit.ly/3CBqiBwand http:/bit.ly/47cUvnC.Aashiesh also has a rich experience in Indian equities as a portfolio manager and lead analyst with leading securities firms.Outside work,Aashiesh has a very active interest in Pranic Healing(a form of energy healing),meditation and spirituality.As part of giving back to society,Aashiesh also engages with Wellness Workplace an initiative to promote employee mental health and well-being.APREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSSUSTAINABLE INNOVATIONSDistrict Cooling at Intellion Park,GurugramAPREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSIn the fast-paced urban sprawl of Gurugram,nestled within its bustling landscape,stands Intellion Park,a beacon of sustainable innovation.This sprawling office park,spread across 25 acres and housing over 3.5 million square feet of development area,isnt just another commercial hub.It is a testament to what can be achieved when innovative design meets sustainable thinking.By Ritesh SachdevThe Backdrop:Indias Cooling ChallengeIndia is no stranger to heatwaves.As one of the first nations predicted to cross human survivability limits due to soaring temperatures,the demand for effective cooling solutions is mounting.Yet,despite this pressing need,a mere 8%of Indian households own airconditioning units.Moreover,the average Indians energy consumption for space cooling stands at a mere 69 kWh,a far cry from the global average of 272 kWh.Intellion Parks Innovative Approach to Cooling When Intellion Park was conceptualized,sustainability was a cornerstone of its design.Proudly flaunting its LEED Platinum certification,the park is equipped with a captive infrastructure,including sewage treatment and backup power systems.Yet,what truly sets it apart is its cooling strategy.Understanding that traditional cooling methods wouldnt suffice for a development of this magnitude,Intellion park opted for a district coolingsystem.This approach,centred on passive design features,significantly reduces the need for mechanical cooling.APREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSWhen Intellion Park was conceptualized,sustainability was a cornerstone of its design.Key Features and Interventions Passive Design Elements:The office park employs measures like insulated building envelopes and minimal glazing to keep heat at bay.Radiant cooling for lift lobbies further enhances the passive cooling effect.Optimized Chillers:The chillers are specially selected for their high Coefficient Of Performance(COP)of 6.9.This ensures efficient cooling even at a higher chilled water temperature of 10C.APREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSAdvanced Technology Integration:.The office park has embraced AI and IoT in its O&M strategy.This allows for superior forecasting,efficient maintenance,and the optimal functioning of all cooling systems.Guaranteeing Performance:Beyond the office parks stateof-the-art design and infrastructure lies its robust operations and maintenance(O&M)strategy.Understanding the criticality of uninterrupted service,the office park has instituted:KPI-linked SLAs for Cooling Services:This guarantees energy efficiency throughout the contract duration and ensures maximum uptime.Reliability-Centered O&M Approach:By leveraging AI/IoT for O&M,Intellion Park has achieved a high degree of automation.A centralized,in-house maintenance team oversees operations,ensuring the longevity of assets and optimized performance.24/7 Operations:With a focus on ensuring a consistently comfortable environment,the park is equipped with systems and protocols that guarantee round-the-clock reliable plant performance.Concluding Thoughts:A Model for the FutureIntellion Park is more than just a commercial office park.It stands as a case study,showcasing what is achievable when we prioritize sustainability.As India grapples with its cooling conundrum,developments like Intellion Park offer hope,pointing towards solutions that are not only effective but also environmentally responsible.As we look to the future,it is clear that embracing such sustainable innovations will be crucial.For now,Intellion Park stands tall,leading the way,and proving that with the right approach,even the most pressing challenges can be surmounted.APREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSRIRIT TE ES SH H S SA AC CH HD DE EV VSrSr.V Vic ice e P Pr re es sid ide en nt t L Le easasin ing g anand d A As ss se et t MMananagage em me en nt tTATATATA R Re ea al lt ty y&I In nf fr ra as st tr ru uc ct tu ur re e L Li im mi it te ed dMr.Ritesh Sachdev heads Commercial Leasing&Asset Management for TATA Realty&Infrastructure Ltd and Tata Housing Development Company Ltd.He has been instrumental in maximizing the operating performance of the TATA Realtys Commercial Portfolio,driving sales/leasing innovation,efficiency of Operations,Marketing and Strategic business decisions as determined by the companys strategic objectives.Mr.Sachdevs diverse career in Commercial Real Estate spans more than 20 years,dealing with Developers and Service Providers.Mr.Sachdev brings with him deep understanding of Global CRE and is acclaimed for fostering deep and strategic relationships with both Fortune 500 occupiers and International Property Consulting firms across most markets in India,regionally within APAC and globally.Mr.Sachdevs last assignment was with Colliers International as Head of Occupier Services,India&MD South India.Prior to joining Colliers,he was associated with Cushman&Wakefield as MD,South India and MD for its Tenant Advisory Group during his 14 years with the company.Prior to his stint with Cushman&Wakefield and Colliers,Mr.Sachdev was also associated with DLF Limited and the Australian Trade Commission.Mr.Sachdev is known for his dynamism and structured approach to instinct.He holds a PostGraduate Diploma in Business Management from Leeds University Business School and a Bachelor of Engineering(Civil)from B.I.E.T Davanagere.APREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSBeyond Finance:Singapores Industrial AmbitionsAs we look to the future,Singapore is quietly setting the stage for a metamorphosis that not only complements its status as a financial giant but amplifies it.Long celebrated as a global financial hub,the Lion City is shedding the one-dimensional narrative and morphing into an industrial stronghold,laying down new foundations that echo the innovation-driven character of other places in Asia Pacific like Taiwan,Japan and South Korea.Diversifying the Economy with Industrial InnovationsFor those who think Singapores economic strength is solely rooted in its financial services,think again.Beyond its familiar skyscrapers housing global financial institutions,Singapore is rapidly diversifying its already robust economy.Singapore is making purposeful strides in key sectors not mere peripheral activities but growing integral segments that contribute to the nations GDP and global standing,with significant capital being funnelled into these sectors.APREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSHigh Tech,Clean Tech:According to projections,2023 will see the completion of a significant 2.21 million square feet of high-tech space,constituting about 18%of the existing stock.For businesses eyeing expansion,now is an opportune time to secure quality,centrally located spaces.New additions like Solaris Tai Seng,Mapletree at Kallang Way,Luzerne,and Harborlink Innohub are creating bespoke spaces for businesses to thrive in 2023 and beyond.These are not just real estate projects;they are incubators of innovation.By Bastiaan Van BeijsterveldtAPREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSThe current developments signal a broader positive trend,highlighting the two-tier market dynamics in the semi-conductor space:while certain sectors are facing an oversupply,the automotive industry,including giants like Toyota and Honda,is experiencing an aggressive expansion,showcasinga marked preference for high-quality components a demand that Singapore is well-poised to meet.In this buoyant environment,the delayed opening of Hyundai Motors plant in Singapore serves as a mere hiccup,hardly overshadowing Singapores escalating prominence in the Southeast Asian market as a nucleus of semiconductor production and innovation.Semiconductors:Despite the global challenges of semiconductor supply,marked by discrepancies in demand and supply as noted by companies such as Micron Technology and Kioxia Holdings,Singapore has strategically positioned itself as a bastion of growth and innovation,attracting an impressive$10 billion in fresh investments in 2022.As the nerve centre of innovations in robotics,autonomous vehicles,and artificial intelligence,the semiconductor industry is steering the next wave of industrialisation fuelling the tens of thousands of sensors found in autonomous vehicles and forming the backbone of cutting-edge technological advancements.APREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSLife Sciences:Singapore is also home to facilities of eight of the top 10 global pharmaceutical companies,solidifying its position as a stronghold in life sciences.CapitaLands Geneo Cluster,a S$1.4 billion project,is set to turn the Singapore Science Park into a magnet for the global scientific community.With work-live-play elements embedded into its design,Geneo is not just a business parkits an ecosystem.Expected to create approximately 20,000 jobs by 2025,the project is the epitome of what the future holds for Singapores diversified industrial sector.Prime Logistics:And then theres the matter of logistics.In a world grappling with a bottlenecked global supply chain,Singapore stands out as a reliable pivot.With companies looking for alternatives to diversify from a One Country-centric model,Singapores robust logistics capabilities are more than just a salient feature;theyre becoming a crucial part of the global supply chain strategy.Nearly 80%of the additional 1.21 million sq.ft.of logistics space in the 2023 projections have been pre-committed from key industries like Third-Party Logistics(3PLs)and Fast-Moving Consumer Goods(FMCG),underscoring the high demand and confidence in Singapores logistics infrastructure.A Transformational Force in APACTurning our eyes toward 2024,the outlook for Singapores industrial sector is not just optimistic;its transformative.Beyond the hard numbers and percentage growth,this evolving industrial narrative adds texture to Singapores business landscape and stands to redefine the entire regions business landscape.Investors have to pay attention.Whether youre an investor looking for diversified opportunities,a multinational firm considering offshore manufacturing,or a visionary intrigued by the future of technology and life sciences,Singapore offers a promising landscape.The city-states commitment to industrial growth and sustainable and advanced technology turns it into a one-stop solution for the modern-day business conundrum.Singapores industrial sector doesnt exist in a vacuum;it plays a strategic role in the broader APAC region.As a nexus for innovation,Singapore is a launchpad for high-tech products and services aimed at burgeoning markets in the region.The advancements in clean technology in Singapore have immediate relevance to nations like Indonesia and the Philippines,where sustainable infrastructure is a pressing need.The growing interest in data centres have led to a spillover effect in Malaysia and Vietnam.The city-state acts as a conduit for foreign investment into the APAC-region,further enhancing its regional importance.APREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSBuilding the Future:Integrated Industrial EcosystemsSingapores economic strategy goes far beyond mere diversification.What the city-state is pioneering is nothing less than an integrated industrial ecosystem.This harmonised network of financial services,logistics,clean technology,and R&D isnt just an alternative to its financial might;its a symbiotic extension that reinforces it.In doing so,Singapore is crafting a blueprint for sustainable industrial development thats being closely watched around the globe.The story of Singapores evolving industrial sector is still being written,but its emerging chapters suggest an unfolding saga of innovation,resilience,and diversified excellence.Its an opportune moment to reconsider not just how we view Singapore,but how we engage with it as a diverse economic entity.Singapore is more than just a member of the APAC community;its a force that propels the whole region forward.In essence,Singapore is not just a city-state in transformation;it is a transformational force in the regional and global stage.And at Colliers,were in the fortunate position of not just being narrators but co-authors in this unfolding saga,assisting businesses and investors in leveraging the exceptional opportunities presented by Singapores dual role as a financial juggernaut and an industrial innovator.We believe in not just predicting the future,but in helping to shape itjust as Singapore is doing today.APREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSBABAS ST TI IA AA AN N V VA AN N B BE EI IJ JS ST TE ER RV VE EL LD DT TMaMan na ag gi in ng g D Di ir re ect cto or r-SinSing gapapo or re eCoCol ll li ie er rs sBastiaan serves as the Managing Director at Colliers in Singapore,where he plays a pivotal role in shaping the strategic direction of the organisation.His responsibilities include the growth and diversification of the company,ensuring top-notch service delivery,and cultivating market-leading teams.He supervises a broad range of business lines,including Capital Markets,Investment Sales,Occupier Services,Valuations&Advisory,Industrial Services,Hotel Advisory,and ESG Services.Additionally,he oversees the Research,Marketing&Communications,Human Resources,and Finance Teams.Before assuming this role,Bastiaan was the Head of Occupier Services in Singapore,where he successfully led complex transaction projects for a variety of global multinationals and investors across the Asia-Pacific region.His professional journey has seen him live and work in several key Asia-Pacific markets,including Singapore,Hong Kong,South Korea,Malaysia,and Australia,giving him a diverse and comprehensive regional perspective.The IncreasingImportanceof Renewable Energy InfrastructureAPREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSBy Professor Graeme NewellAPREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSInfrastructure has been a key asset class for institutional investors for many years;typically accounting for 5-10%of their overall portfolios.This has seen major investment managers such as Macquarie,Brookfield,GIP and IFM actively involved in this infrastructure space to meet the investment requirements for leading institutional investors such as CPPIB,CDPQ,ADIA and AustralianSuper.Typically,this infrastructure exposure has been via the infrastructure sub-sectors of power,water,transport and communications.But the infrastructure sector is changing quickly;particularly with a global focus on reduced carbon emissions by 2030.This has seen renewable energy infrastructure take on increased importance across the renewable energy infrastructure sub-sectors of wind farms,solar power,hydro,battery storage and hydrogen power.Importantly,the issues go well beyond the investment perspective,by also including the environmental and social perspectives.It is a changing landscape and it is happening now.Renewable energy infrastructureLets drill into some of the specifics of renewable energy infrastructure.Firstly,institutional investors are attaching a higher priority to renewable energy infrastructure amongst the infrastructure sectors in their portfolios for future investment opportunities.This includes solar power,wind power(offshore and onshore),hydro,battery storage and hydrogen power;with this being consistently confirmed by various recent investor sentiment surveys.The impact will see higher renewable energy infrastructure allocations in their portfolios going forward.The“language”around renewable energy infrastructure funds has also become very sophisticated,including energy transition,green energy,clean power,impact,and energy climate opportunities.Infrastructure fund managers have also increased the percentage of renewable energy infrastructure in their fund offerings.This includes the major infrastructure players(eg:Brookfield),and has also seen infrastructure fund managers who are 100%in the renewable energy infrastructure space,including newer players such as Copenhagen Infrastructure and Infrared.Several significant renewable energy infrastructure funds are raising capital at present;often seeking up to$15 B in capital.The scale of this renewable energy market now also sees renewable energy infrastructure fund of funds being established.Importantly,many of the players in this space are Asia-Pacific;this includes GIC and Temasek.Check their websites for specific details of their renewable energy infrastructure activities and agendas.Importantly,investors are seeking exposure to all levels of the renewable energy infrastructure space via different platforms.So,as well as acquiring specific renewable energy infrastructure assets and investing in renewable energy infrastructure funds,they are involved in joint venture development projects,acquiring project developers and renewable energy materials manufacturers,and providing debt financing.Amongst the listed renewable energy infrastructure players,there are significant players;often being across a number of renewable energy infrastructure sub-sectors at a local,regional and global level.Key listed players include Orsted(Denmark),EDPR(Spain,Portugal),Atlantica Sustainable Infrastructure(USA),EDPE(Brazil)and Transalta Renewables(Canada).Check their websites to see the scale and diversity of their renewable energy infrastructure operations.APREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSChallengesandopportunitiesgoingforwardGoing forward,renewable energy infrastructure is more than just an investment issue;it also has global environmental and social dimensions as the bigger issues.This is likely to see an increased role of stakeholders in pension funds insisting on increased levels of renewable energy infrastructure in their portfolios;in a similar manner to how we saw investor activism against fossil fuel stocks in their portfolios.The opportunities are significant;particularly as we see a more sophisticated market and the benefits of new technology in the renewable energy space.We can also expect to see institutional investors increase their portfolio allocations to renewable energy infrastructure,as well as establishing their own in-house teams as they cover both renewable energy infrastructure assets and joint venture development projects.Some institutional investors have already made this strategic shift.Over time,with sufficient scale,we can also expect to see renewable energy infrastructure REITs established,to add to the infrastructure REITs we already see in the US and China.Further activity in this space is expected in Asia;further adding to that recently seen in Japan(by Actis)and The Philippines(BlackRock).Clearly,there are also risks attached to the further development of this sector.These include geopolitical risk,increased construction costs,ongoing government programs to support renewable energy,supply chain issues,availability of local expertise and sufficient institutional-grade stock.Many institutional investors are now also requiring“guarantee-of-origin”energy certificates before committing to this sector.Other issues such as environmental damage from windfarms have also been raised.Overall,this sees renewable energy infrastructure as an exciting space at an Asia-Pacific and global level;with dimensions going well beyond the investment space into the broader global environmental agenda of carbon emissions reduction.Role of APREAClearly,renewable energy infrastructure will take on increased importance going forward.With APREAs mandate in the real asset space,it is an excellent opportunity for APREA to play a leading role in championing renewable energy infrastructure in both the developed and emerging markets in the Asia-Pacific.This applies in the areas of international best practice,incisive case studies and legislative updates for renewable energy infrastructure.It is a win-win opportunity,as we seek to reduce carbon emissions globally.Make sure you keep up-to-date with these important developments,as renewable energy infrastructure plays a key role going forward in addressing the critical challenges of reduced carbon emissions and delivering zero-carbon strategies for institutional investors.APREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSWith APREAs mandate in the real asset space,it is an excellent opportunity for APREA to play a leading role in championing renewable energy infrastructure in both the developed and emerging markets in the Asia-Pacific.APREA Knowledge Brief Volume 11 NEW HORIZONS:INNOVATIONS IN REAL ASSETSGRGRA AE EMME E NENEWWE EL LL LPrPro of fe es ss so or r ofof PrPro op pe er rt ty y In Inv vesest tm menent tUniUniv ve er rs si it ty y ofof WeWes st te er rn n SySyd dn ne ey y,AuAus st tr ra al li ia aGraeme Newell is Professor of Property Investment at University of Western Sydney,Australia.Graeme has been actively involved in real estate research for over 40 years,with a particular focus on real estate investment.This research has involved REITs,non-listed real estate funds,alternate real estate sectors and ESG.He has strong links to the real estate industry,both in Australia and internationally.This includes links with APREA,where he has written several reports for APREA,including reports on the importance of real estate in Asian pension funds.Graeme also has strong links to other real estate professional associations including the Australian Property Institute,Property Council of Australia,ANREV and Investment Property Forum,having prepared a range of real estate reports for these organisations.He has published widely on a range of ESG issues.Graeme Newell is also a member of the APREA ESG committee.F FOLOLL LOWOW US US ONONLinkedInWeChatX(Twitter)FacebookInstagramSpotifyYoutubeWWW.APREA.ASIAAsia Pacific Real Assets Association18 Robinson Road#15-01Singapore 048547enquiriesaprea.asia
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