But wait a sec.
The oily water separator is used to separate storm water from any petroleum products in the bunded area and not for discharge of the petroleum in the event of a catastrophic failure of the tank, fire or no fire.
If there is a catastrophic failure of the tank, then there is nothing the oily water separator can do even of its in the bunded area or not. Only if there is rainfall, then I guess it can come into play. But for a catastrophic failure, the product in the bunded area has to be pumped out to other storage tanks. If there is a fire, one would definitely not want product getting out of the bunded area. The product would have to be contained and covered with foam.
Any conduits leading through the bunded area would always have gate valves on either side and a always kept close. Therefore, for a catastrophic failure, no product can get out of the bund.
Therefore, it does not seem to matter whether the oily water separator in inside or outside the bunded area.
Note that this bunded area is not connected to any other bunded areas and there are no burners on the separator.