Where do We Tighten Oil and Gas Regulatory Compliance?
Oil and gas operations require dedicated and high precision-based scientific techniques. The consequences of a single error can have cascading deleterious effects on not just the operators financial, social and scientific capabilities, but, significantly, on the surrounding environment which, in most cases, is largely relied upon by local inhabitants. Over the last decades, disaster from oil and gas operations including blowout (explosion), spills, accidental releases, etc have been slowly plummeting; yet a single Blow-out Preventer (BOP) failure, like the BP 2010 Macondo experience in the Gulf of Mexico, can immensely trigger new thinking into systems and equipment designs focusing specifically on Process Safety Management (PSM).
Blowouts at oil and gas producing facilities grossly affect the company. It drives the compnay, in most instances, to bankruptcy and collapse. BP, for example, saw a steep fall in its shares (about 33%) following Macondo, dropping from the world second largest oil and gas company, to one of the four majors by market value in 2013. Maintaining 4th position is due to reselling of some assets to meet up with legal penalties. If we posit this situation in the case of a small company with operating capital less than a billion dollar, filing for bankruptcy will be the only alternative.
Health, Environment and Safety (HES) is critical in ensuring that oil and gas production is efficiently and sustainably managed to meet the growing energy demand. Liberia’s case, as an emerging player, requires an effective regulatory environment to avoid replication of occurrences as witnessed in the West African oil and gas history. Notwithstanding, our legal instruments and regulatory environment must be aligned to a strategic objective; whether skewing towards safety or environment. This decision will then guide training and project activities.
IOCs overarching priority
Increasing profit is unequivocally a fundamental goal of any privately held company; International Oil Companies (IOCs) being no exception. Any decision, action, or activity with significant implications on profit margin will be a key variable within the IOC Decision Analysis (DA) model. Oil and gas disasters can significantly affect profits. For example, Piper Alpha exploded in North Sea on 6 July 1988, killing 167 men with insured loss of about US$3.4 billion; Exxon Valdez spilled about 750,000 barrels of crude in the US and Exxon paid over US$700 million in both compensatory and punitive damages excluding an additional $2 billion used for clean-up. Macondo incidents spilled 4.9 million barrels and as of February 2013, criminal and civil settlements and payments to a trust fund had cost BP a whopping $42.2 billion.
As earlier stated, blowout is predominately safety-contingent. Historically, most, if not all, of the major disaster in the oil and gas industry has been attributed to PSM which broadly describes asset integrity, containment, equipment design and function, system maintenance, avoidance of normalization of deviance, etc. Few industry accounts illustrate this better. Exxon Valdez, an oil tanker bound for Long Beach, California, struck Prince William Sound’s Bligh Reef and spilled over 750,000 barrels of crude. Investigation found out that the inherent safety design of the tanker was responsible for the damage. Following the spill, tankers and major ships now have double plated metal shield to prevent easy cracking incase of contact with another object. In the case of Piper Alpha, investigators were able to trace the cause to a missing safety valve on a condensate pump which was removed for maintenance. Paperwork, stipulating that the pump was out of use, was signed by the engineer but either got missing or misplaced by a supervisor. In Macondo case, (BOP) failure, a safety device, was the main cause of the accident even though there were other safety related dominos.
Safety vs Environmental Stewardship
Clearly, safety has a far-reaching effect on profits; therefore, IOCs ensure that it is a fundamental component considered in their business decision and operating strategies. A growing practice within the industry, evident by the low rate of safety-related disaster, suggests that safety is being placed at the top of the management decision paradigm. This does not mean companies do not care about the environment. In fact, some IOCs have established guidelines on environmental stewardship which, in the absence of local environmental guidance, take precedence.
Environmental stewardship in this content describes holistically environmental management and protection as well as biodiversity conservation. While a safety-contingent blowout or spill can result into negative environmental and biodiversity effects, immediate restoration or remediation efforts, in some cases, can occur. In most developing countries, clean-up exercises occur for short-term acute effect. Long-term chronic effects, in most cases, are the challenges community face for years. Some IOCs take advantage of the poor legal system and inability of locals to fight back. Therefore, tighter and enforceable environmental regulations must always govern oil and gas operations especially within developing countries.
Additionally, environmental programs prior to disaster must be in place to build adaptive capacity of either the community or the surrounding environment. There must be an understanding of the impacts due to unplanned events from drilling operations. Program such as assessment of coastline (for offshore operations), protection of sensitive species and habitats vulnerable to oil spill including mangrove and sea turtles, and development of national competence and readiness for spill cleanup, must be carried out preventive measures. One of the intents of the Environmental Impact Assessment (EIA), required prior to commencement of drilling operations, is to allow planning for future impacts. Unfortunately, there is little or no follow-up on EIA mitigation actions. Experience has shown that post environmental effects can take decades to address.
Finally, as shown above, most IOCs address safety issues strategically with significant considerations for equipment design, operating procedures, asset integrity, and behavior of employees participating in the operations. Most safety-related disasters sources are traced to platforms owned or contracted by IOCs, therefore liability for damages, most likely, are directed at them. Knowing this fact encourages IOCs to take responsibility and invest more in safety systems and design. Government regulators, particularly NOCAL on the other hand, needs to skew its attention on environmental stewardship by improving regulatory compliance and creating targeted environmental and biodiversity management programs. There has never been a mass citizen action against a government due to poor safety culture at oil facilities but there are many accounts of uprising due to environmental degradation.
Urias Goll is an environmental economist working for NOCAL and seconded to Chevron. He can be contacted at email@example.com