A smarter approach to managing major accident hazards

Published: 9 October 2017

• There is regulatory concern globally over oil and gas major accident risks

• Cost-cutting measures in the oil and gas industry could raise the risk level

• Digitalization enables cost-effective risk management

Mounting evidence suggests that the offshore oil and gas industry needs to increase focus on reducing the risk of major accidents and near misses, and continue tackling safety challenges that were considered tough even before the drop in oil price.

Regulators worldwide are showing concern over major accident hazard management (MAHM), and keeping an eye on the safety impact of cost cutting in a long-term period of low oil prices.

As operators seek improved but cost-effective approaches to MAHM, the ability to collect, analyse, and make decisions on real-time data is emerging as a critical factor in identifying developing issues in the condition of assets and how they are operated.

Reasons for concern about the potential for major accidents

In 2016 and 2017, offshore safety has moved centre stage again in the North Sea, one of the most tightly-regulated oil and gas regions in the world.

The UK Health & Safety Executive (HSE) recently shared figures with the industry showing that major hydrocarbon releases on the UK Continental Shelf have not been reducing during the last decade, for example; though the number classed as ‘significant’ has dropped. As of September 2017, the HSE was preparing updated guidance on loss of containment, with a special focus on mechanisms causing major releases.

In Norway, the government is conducting its first White Paper review of offshore health, safety and environmental performance in the country’s oil and gas industry since 2011, following serious incidents offshore and onshore in 2015–2016.¹

Ageing assets and other industry trends require risk management

Many offshore oil and gas assets worldwide are nearing or beyond originally-designed operating lives – around 25 years for platforms and 30 for pipelines – according to data from Westwood Global Energy Group.

The percentage of offshore platforms installed 20 or more years ago is 68% in Western Europe, 70% in Latin America, 71% in North America and 75% in Africa – the regions with the highest such incidence. North America has the highest percentage (31%) of offshore pipeline kilometres aged 30 years or more.

In addition, ownership of some offshore assets is changing as new companies with different business models acquire platforms and infrastructure from existing operators.

Not only older, traditional production assets are on regulators’ radars. In 2015, for example, there was a leak of condensate leading to an explosion resulting in nine people dying and 26 being injured on the floating production storage and offloading (FPSO) unit Cidade de São Mateus offshore Brazil. The report of the inquiry by the Brazilian regulator identified 28 root causes and found flaws in the management of operational safety.²

The ‘big crew change’ as one generation of oil and gas workers hands over to another is also relevant from a safety perspective, according to Janeen Judah, 2017 president of the Society of Petroleum Engineers.

She said: “I think safety culture is pretty much ingrained, but preventable mistakes will probably be made in the upturn because we did not prepare well enough for the people transition that we knew was coming.”

Cost cutting may raise accident risk

The impact of cost cutting on the risk level of major accidents is a matter of argument within the industry. However, cost cuts in response to economic conditions post-2014 are a potential cause for concern over safety, according to Andy Samuel, chief executive of the Oil and Gas Authority, the UK regulator.

Speaking at a UK oil and gas industry forum event³ in August 2017, he commented: “There must have been some temptation to reduce maintenance potentially too far. So far, there does not seem to be any data to say that we [the UK oil and gas industry] are heading badly in the wrong direction, which is reassuring. But […] let’s keep that chronic unease [over the risk of a major accident] and keep a very close eye on this, because it should be a concern to all of us.”

DNV GL has provided one of the most up-to-date snapshots of industry adjustment to the business environment.⁴ The company asked oil and gas industry leaders in late 2016 if cost cuts in their organizations were raising health and safety risk. Nearly a fifth (19%) said yes, and the percentage rose incrementally among respondents further down the chain of command. Only 11% of top level executives believed safety risks had increased because of cost cutting, compared with 23% of people in non-management roles.

Graham Bennett, vice president, DNV GL – Oil & Gas, warned: “There is always a lag between cutting costs and impacts on health, safety and environmental performance. You may get away for two or three years with reduced investment in competency training, inspection, maintenance and the physical fabric of your installations. But a few years later, you will start to see lack of investment come back to bite you.”

Given concerns in the UK and Norway, which are strongly-regulated environments, it is no surprise that questions about MAHM are global, including where regulation may be lighter or less well-formed, Bennett suggested.

“The good news is that a new and smarter generation of cost-effective solutions to improve major accident hazard management is emerging as technology advances, digitalization spreads, and companies better understand how to prevent major accidents,” he added.

Digitalization enables cost-effective risk management

In considering how to improve MAHM, operators face an investment challenge because – as DNV GL’s Energy Transition Outlook report concludes – the energy transition will sustain downward pressure on oil and gas industry capital and operational expenditure (capex, opex).⁵

Cost control will counter this by assisting operators to stay relevant, while also affecting capex to replace depleting reserves and opex to maintain safety and sustainability.

Digital technologies and smarter use of data can help to contain costs while improving safety by enabling reduced downtime, predictive maintenance, performance forecasting, real-time risk management and energy efficiency.

Collecting, moving, analysing and interpreting data is becoming progressively easier and cheaper through the impact of remote sensing, automation, augmented reality, the industrial Internet of Things (IoT), and other advances in information and communication technology (ICT).

Cloud-based digital twins offer opportunity for greater operational and cost efficiencies in future oil and gas operations, for example. “Imagine a 30,000-ton rig rendered perfectly and dynamically in virtual reality throughout its lifecycle,” Bennett explained.

“Analysing sensor data from a corporate IoT, digital twins can provide easy-to-understand dynamic updates on asset condition and operational parameter states, helping to optimize scheduling of costly inspection and maintenance regimes.”

A growing trend towards moving offshore operations from platform to seabed in some environments will entail new ICT coupled with process automation, analytics for failure prediction, and intelligent sensors.

The power of real-time and near real-time approaches

Concepts such as dynamic barrier management utilizing sensors, ICT and data analytics to detect, analyse, interpret and predict health, safety and environmental risks in real time or near-real time can be a bulwark against reputational, financial, environmental and societal damage.

Enhanced mobile computing, assisted by app-centric analytics, can increase uptime, improve productivity and reduce margins of errors.

“There are other tools that can improve on traditional approaches to safety studies, and operational verification that can assist operators in understanding their risk levels and managing safety,” Bennett added.

They include new approaches to quantitative risk assessment; advanced assessment tools for safety and sustainability management systems;⁶ and enhanced methods for conducting in-service verification. DNV GL is continuing to develop many of these in close collaboration with customers through a series of joint industry projects.

References

1 ‘Minister Hauglie announces new white paper on petroleum safety’, 30 November 2016, Norwegian Ministry of Labour and Social Affairs news release
2 ‘Investigation report of the explosion incident occurred 11/02/2015 in the FPSO Cidad de São Mateus’, Agência Nacional do Petróleo, Gás Natural e Biocombustíveis, Brazil, August 2015
3 ‘New North Sea: put industry on steroids to boost discovery’, Energy Voice, 30 August 2017
4 ‘Short-term agility, long-term resilience: the outlook for the oil and gas industry in 2017’, DNV GL, January 2017
5 ‘Oil and gas forecast to 2050: Energy Transition Outlook 2017’, DNV GL, September 2017
6 ‘Chinese chemical plants and refiners raise the bar on HSEQ’, DNV GL PERSPECTIVES, DNV GL, June 2017

Disclaimer: 

DNV prides itself on providing accurate information but makes no claims or guarantees about the accuracy, completeness or adequacy of contents in this publication, and disclaims liability for any errors or omissions. The authors’ views here do not necessarily reflect DNV’s views.