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Why are vendor inspections important in the oil and gas industry. What is the value of a Factory Acceptance Test (FAT) for hazardous area systems?

There are many advantages to having the entire supply chain of equipment validated.Lithium Oil and Gas helps our customers manage the quality and compliance of their purchased equipment in 3 steps.

Design Review:
This is one of the most important stages of the procurement process because it has the potential to save the most amount of money with the least investment. Most formalised systems and engineering processes recognise that the cost of correcting a fault increases as it progresses through the development process. Additional effort spent in the early stages of development to discover and
correct errors is therefore worthwhile.

A design review is a step of development that measures project success and prioritizes the areas of focus to manage compliance, safety and the end users’ requirements. A design review is not a design pitch. It’s a process to evaluate and critique current design work. The review looks at how specific features have been implemented to evaluate compliance, functionality, and safety.

The design of a system to be used in the oil and gas industry is an extremely complicated task that requires compliance to be approached from many angles. The extremely onerous compliance requirements set out by all of the overlapping standards can in itself lead to non-compliances because design teams can be overwhelmed by all of the converging standards. This problem is often heightened because the design teams are based overseas and are not used to working with Australians standards, codes of practice and legislation.

An independent design review by component auditors and engineering staff can identify systemic and costly non-compliances before the design is finalised and prior to equipment fabrication. Documented feedback is given in a simple and understandable manner that can be turned into actionable items to rectify the issues detected.

Vendor Inspections:
Vendor Inspections sometimes referred to as source inspections, shop inspections, third party inspections or vendor surveillance are the important next step following a design review remembering that the cost of correcting a fault increases as it progresses through the development process. A vendor inspection takes place at the manufacturer’s facility before and during the fabrication process.
The vendor inspections look at a wide range of items that are critical to the supply of compliant, safe and functional equipment in the oil and gas sector. A good vendor inspection programme can be tailored to ensure the equipment is manufactured to the onerous tolerances and specifications required in the Oil and Gas sector. Some of the following items can be continually reviewed as part of the ongoing vendor surveillance:

  • Vendor quality management systems,
  • Vendor health and safety system,
  • Vendor supply chains and material quality,
  • Project timelines, milestones and associated planning,
  • Contingency and risk mitigation strategies,
  • Staff competencies and training,
  • Witnessed testing,
  • Equipment calibration and testing procedures,
  • Inspections plans and quality surveillance.

Factory Acceptance Testing – FAT:
This is the final step in the quality management of the equipment procurement process. If the design reviews and vendor surveillance have been conducted correctly, the factory acceptance testing should be the final validation of the equipment’s functionality, safety and compliance. It should not be expected to identify major defects as the cost of rectifying them at this stage can be very costly. If major defects are identified at this stage this suggests that major failings have taken place during the design review and vendor surveillance. The factory acceptance testing conducted by a competent third party is the final opportunity to identify issues before the equipment is sent to site. The FAT helps in the following areas:

  • Gain independent proof of functionality, quality and integrity with our comprehensive checking process,
  • Verify all-important documents, such as manuals, instructions, plans, drawings, piping and instrumentation diagrams (P&IDs),
  • Ensure that your equipment or plant performs as expected under the testable range of foreseeable conditions, including misuse and error,

Lithium Oil and Gas can help manage the procurement process by providing third party design reviews, vendor inspections and factory acceptance testing to ensure end users receive the equipment that meets or exceeds their expectations. Eliminating the need for costly rework when the equipment arrives on site.


“This following information represents and opinion only of a general nature, the specifics of each individual situation must be taken into account with reference to the relevant Legislation, Codes of practice and Australian standards. Professional advice should be sort if there is any doubt.”

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