Monday, March 4, 2013 Houston, TX
1:00–5:30 p.m.
UNDERSTANDING THE OIL AND GAS INDUSTRY AND ITS RISKS
Presented by
Vance Fairchild John A. Jacobi, P.E., J.D. Bruce M. Laubacher President and Vice President, Vice President Managing Principal Pipeline Systems Compliance ACE Excess Casualty G2 Partners, LLC and Operations Services G2 Parters, LLC
J.D. Kern Jacob Parsons Connie Stum Vice President and Principal Director Senior Manager of Insurance G2 Partners, LLC The Claro Group Devon Energy Corporation
Brian Twellman Trey Whitley, P.E. John Paul Wiggin Director Vice President and Principal Senior Mgmt. Consultant The Claro Group G2 Partners, LLC G2 Partners, LLC
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© 2013 The Travelers Indemnity Company. All rights reserved. Travelers and the Travelers Umbrella logo are registered trademarks of The Travelers Indemnity Company in the U.S. and other countries. CP-7853 Rev. 1-13 Notes
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6 Vance Fairchild President and Managing Principal G2 Partners, LLC
Mr. Fairchild serves as president and managing principal of G2 Partners, LLC, leading G2’s strate- gic direction, business service lines, and client development and identifying and forging key part- nering relationships, largely focused on the development of G2’s environmentally distressed as- set business. Mr. Fairchild has 20-plus years’ professional experience, having worked across the entire environmental market spectrum.
Mr. Fairchild has worked on permitting capital pipeline and compression projects and managing soil, sediments, surfaces, and groundwater remediation and operational and emergency re- sponse of pipeline disruptions. He also successfully led the financial recovery of environmental expenses through commercial general liability insurance and the Federal Energy Regulatory Commission of hundreds of millions of dollars.
Mr. Fairchild has extensive experience in the acquisition of environmentally impaired industrial real estate, fully liquidated liability assumption, and cost-effective mitigation, land re-entitle- ment, and profitable monetization of real property for highest and best use, including creative ecological and beneficial reuse.
Mr. Fairchild has led several as-is real estate acquisitions and successful remediation, regulatory closure, and asset divestitures totaling $150 million of contract and real estate value and has pro- vided principal oversight for the execution of many tens of millions of dollars more of liability transfer, assessment and remediation, facilities demolition, and related environmental services contracts at many sites across the United States. At some of these sites, the highest and best use for previously environmentally impacted properties included integrating “beneficial reuse” (e.g., wetlands, natural resource and habitat mitigation, critical land conservation and enhancement, creative “ready for reuse” of landfills, water quality and quantity enhancements, green and open space, and other beneficial natural resource use). By implementing sustainable and balanced de- velopment, with the extensive use of “green” remediation approaches and technologies, includ- ing phyto-remediation, in-situ treatment, and less energy-intensive passive cleanup approaches, Mr. Fairchild is successful in differentiating projects and properties by setting a “green vision” for the collective benefit of sellers, buyers, and developers and, in the process, builds and sustains grassroots community, public, and regulatory support for the proposed efficient, timely, and cost-effective cleanup and restoration/reuse of prior industrial operations.
Most recently, Mr. Fairchild has been managing pipeline data improvement and regulatory com- pliance initiatives supporting natural gas transmission and gas utility companies. These projects include resolving pipeline attribute information, integrating in-line inspection data, and improv- ing data quality for determining maximum allowable operating pressure.
7 John A. Jacobi, P.E., J.D. Vice President, Pipeline Systems Compliance and Operations Services G2 Partners, LLC
Mr. Jacobi is an industrial engineer and a licensed attorney with over 30 years of energy industry experience.
Prior to joining G2, Mr. Jacobi served as community assistance/technical services manager in the U.S. Department of Transportation’s Office of Pipeline Safety, Southwest Region, for almost a de- cade. He began his career with the U.S. Army Materiel Command with assignments at Red River Army Depot and the Aviation Systems Command before becoming chief engineer, Lake City Army Ammunition Plant. His private sector experience includes 13 years with Tenneco Inc. and Tennes- see Gas Pipeline (TGP), including stints as planning manager, manager of technical services, and attorney dealing with health, safety, and environmental compliance issues for both Tenneco Inc. and TGP. He left Tenneco for a career as an environmental consultant focusing on regulatory com- pliance, pipelines, and energy issues.
A former Presidential Exchange Executive, Mr. Jacobi received his Bachelor of Science in mechan- ical engineering (with Honors) from Rose-Hulman Institute of Technology, his Master of Science in industrial engineering from Texas A&M University, and his Juris Doctorate from the University of Missouri - Kansas City.
Bruce Laubacher Vice President ACE Excess Casualty
Bruce Laubacher serves as vice president in ACE USA’s Casualty Risk Division. Based in Houston, Texas, Mr. Laubacher has responsibility for all aspects of production and development of the ACE Excess Casualty energy product portfolio within the regions of Houston, Southwest (Dallas), Los Angeles, and San Francisco.
Mr. Laubacher has served in the insurance industry for more than 36 years. Since 1981, he has mainly been involved in primary umbrella and excess casualty underwriting. Mr. Laubacher joined ACE in 2004 as part of the National Accounts team in New York City. He moved to Houston in 2005 to focus on underwriting excess casualty coverage for the energy industry.
Prior to his tenure with ACE, Mr. Laubacher served in various management roles at American In- ternational Group (AIG), Chubb Group of Insurance Companies, Great American Insurance Com- pany, and Prudential Reinsurance.
Mr. Laubacher received his bachelor of sciences degree in business administration from San Diego State University.
8 J.D. Kern Vice President and Principal G2 Partners, LLC
Mr. Kern focuses on developing and delivering solutions to complex environmental health, safe- ty, and asset integrity issues facing the integrated oil and gas industry (upstream to down- stream). He also serves on development teams for large capital projects where he focuses on de- veloping strategies, plans/schedules to achieve regulatory approvals and permits and identifying, quantifying, and mitigating key project risks. Mr. Kern also oversees pipeline systems integrity projects for the midstream oil and gas and pipeline industries focusing on meeting the growing challenges of ensuring that safety and integrity performance satisfies corporate governance, reg- ulatory, and operational expectations.
Mr. Kern has supported projects that have ranged from the development of liquefied natural gas import terminals to removal of pump stations on an Alaskan pipeline. He has also led G2 Part- ners’ efforts to develop programs such as a comprehensive Facility Integrity Management (FIM) program for a major natural gas pipeline operator.
He provides critical support to mergers and acquisitions by valuing, characterizing, and timing risks associated with assets and developing corresponding risk allocation provisions/manage- ment solutions. Mr. Kern guides his clients through environmental risk transfer transactions that facilitate closure of mergers and acquisitions; resolve indemnifications and other multi-party in- terdependencies; provide cost-certain solution to highly variable liabilities; and create a means for companies to monetize discontinued operations/surplus properties. Mr. Kern has assisted his clients (integrated oil and gas sectors, upstream–downstream) in successfully consummating nu- merous successful mergers and acquisitions worth billions of dollars involving the health and safety evaluation, management, and integration of hundreds millions of dollars of environmental liabilities.
Prior to forming G2 Partners, LLC, Mr. Kern served as a senior executive for a publically traded en- gineering company for 9 years where he led the successful development and management of ex- it strategy (environmental risk transfer and distressed real estate acquisition transactions—full assumption of environmental obligations) transactions valued at $80 million. Critical client assets included: gas processing plants and compressor stations, pipelines, refined product storage ter- minals, and manufacturing facilities.
Mr. Kern has a Bachelor of Science degree in petroleum engineering from Colorado School of Mines.
9 Jacob S. Parsons Director The Claro Group
Connie Stum Senior Manager of Insurance Devon Energy Corporation
Ms. Stum is the senior manager of insurance at Devon Energy. She is a native of central "bluegrass country" Kentucky. She began her insurance career in Nashville, Tennessee, in 1975 working for Continental Insurance Company and then transitioned to what is now Willis Brokerage. Ms. Stum and her family made their way to Oklahoma City in 1991 where she was employed as an account executive at HRH of Oklahoma, now Willis of Oklahoma, where she administered the Devon ac- count. She was recruited by Devon Energy as an insurance manager in the spring of 2000 shortly after Devon had merged with PennzEnergy in the fall of 1999. She has witnessed the growth of Devon from a mere 200 employees to in excess of 5,000 today. She was instrumental in the place- ment of brokerage services and insurance programs for the United States, Canada, and the Gulf of Mexico, in addition to numerous international locations as a result of five major acquisitions and/ or mergers by Devon Energy since 1999.
To date, her responsibilities include risk and project management analysis, procurement and ad- ministration of property, casualty and surety insurance programs, contract review from purchase and sale agreements to joint operating agreement, master service agreements, drilling contracts, lease agreements, etc. Additional responsibilities include a steady stream of committee participa- tion in EHS, Security, E & P and M & M operations, Business Continuity, and upper management.
Her most recent noteworthy accomplishment is the 3-year OCIP and Builders Risk program ad- ministration for the new Devon Energy Center situated in downtown Oklahoma City. The end re- sult of this $850 million construction project was a 22 percent work comp loss ratio over the life of the project, with no fatalities. There were a total of 5, 620,000 +/– man hours worked, ending in a $0.43 work comp expense per man hour. Ms. Stum is an active member of the local RIMS chapter in Oklahoma City, a member of the National Association of Professional Women, co-edu- cational member of the Houston Energy Risk Managers Association, an active member of the North TX Energy Risk Managers Association, and a Certified Insurance Counselor.
10 Brian Twellman Director The Claro Group
Mr. Twellman is a director and one of the original members of The Claro Group. He is part of the firm’s Global Disputes, Claims and Investigations Consulting practice, which is dedicated to the preparation and resolution of major insurance claims and financial disputes. For over 14 years, Mr. Twellman has assisted clients and their counsel with quantifying and understanding complex financial and economic issues. He is a specialist in creating probabilistic decision models (e.g., decision-trees, Monte Carlo analysis, etc.) to support client management decisions and forecasts in the quantification of major event risks, uncertain future liabilities, and evaluation of policy holders’ property and casualty insurance claims. Prior to The Claro Group, Mr. Twellman was part of the economic and financial consulting firm of LECG and the Financial Advisory Services con- sulting practice at Arthur Andersen.
Trey Whitley, P.E. Vice President and Principal G2 Partners, LLC
Most recently, Mr. Whitley has been responsible for staffing and managing data improvement initiatives supporting utilities and natural gas pipeline operators. These projects include resolving pipeline attribute information, integrating in-line inspection data, associating records, and im- proving data quality to support maximum allowable operating pressure verification.
For 10 years, Mr. Whitley was a senior program manager at a publicly traded engineering and risk management firm, responsible for the technical and financial performance of 13 fixed-price lia- bility transfer projects with over $160 million of known remediation obligations. He led diverse teams of project managers, technical experts, and strategic subcontractors in identifying, evalu- ating, and implementing cost-effective site closure strategies. Mr. Whitley uses the “owner’s mentality” acquired in successfully managing liability transfer projects to rigorously advocate his clients’ interests when dealing with affected stakeholders and ensuring goal alignment.
Previously, Mr. Whitley worked as a thermal and environmental engineer in the aerospace indus- try and as a project engineer for a company specializing in biological remediation and wastewa- ter treatment.
Mr. Whitley has a B.S. in agricultural engineering from Texas A&M University and an M.S. in envi- ronmental engineering from the University of Houston. He is a Licensed Professional Engineer in Texas and Kansas.
11 John Paul Wiggin Senior Management Consultant G2 Partners, LLC
Mr. Wiggin’s practice area is focused on supporting client success in developing and deploying op- erations performance assurance systems and integrated operations strategies.
Prior to his current role as practice lead, he spent 27 years in corporate management assignments in the energy, aerospace, and consulting services sectors.
Mr. Wiggin began his career with Exxon Corporation, spending 13 years in a variety of domestic and international project management assignments.
He left Exxon to join Lockheed Martin Corporation, where his corporate energy, environmental, safety, and health organization transformed the corporation from an average government servic- es contractor to a benchmarked industry leader.
After leaving Lockheed Martin, Mr. Wiggin spent 4 years with TRC Companies, Inc., as a senior vice president responsible for supporting acquisition and post-acquisition integration of the firms acquired in the corporation’s active mergers and acquisitions program. He formed the Corporate Compliance Office responsible for SOx compliance and was the executive sponsor for develop- ment of the company’s international management consulting practice.
Mr. Wiggin earned a Bachelor of Science in civil engineering (with honors) from Louisiana Tech University. He has completed executive management programs at Exxon and Lockheed Martin and graduate studies in strategic operations management at the University of Maryland.
12 Overview of the Oil & Gas Industry and Its Risks IRMI Workshop Houston March 4, 2013
JOHN A. JACOBI, P.E., J.D. TREY WHITLEY, P. E.
Introduction to G2 Partners, LLC
2
Our Principals and Senior Managers all have many years of experience solving complex problems for the energy industry. Our core areas of expertise are represented by the service areas summarized below:
Pipeline Data and Pipeline Environmental M&A Transactions Strategic Records Systems and Water and Project Consulting Compliance Integrity Resources Development
G2 Partners is a Recent high-profile G2 Partners has Our transaction Our partners work national leader in accidents involving provided a broad support services routinely with assisting clients to oil and gas and range of cover all aspects of senior corporate establish an pipeline assets environmental a project and/or officers across effective data have escalated the services on transaction multiple industries management demand for thousands of planning, on special advisory system and to rigorous risk projects across the development, and assignments. assure that the management country and around implementation, resulting information programs that the world for a creating a is adequate to comply with ever- diverse group of competitive satisfy both changing clients. advantage for our compliance and regulatory clients. operational needs. requirements.
13 Outline
3
• Definitions • Current Regulations • Regulatory Drivers • Reauthorization • Possible Changes • Timing • Questions
4
4
14 5
5
Gas System
6 • More than 210 natural gas pipeline systems • 305,000 miles of transmission pipelines • More than 1,400 compressor stations • More than 11,000 delivery points, 5,000 receipt points, and 1,400 interconnection points • 24 hubs or market centers that provide additional interconnections • 400 underground gas storage facilities • 49 locations where natural gas can be imported/exported via pipelines • 8 LNG (liquefied natural gas) import facilities and 100 LNG peaking facilities Source: US Energy Information Administration (EIA)
15 7
7
8
16 Definitions
9
Production Operation Piping and equipment used for production and preparation for transportation or delivery of [gas] including the following: Extraction and recovery, lifting, stabilization, treatment, separation, production processing, storage and measurement of [gas]; and or transmission line. (49 CFR 195.2 – not defined in Part 192)
Definitions
10
Production Operation
Piping and equipment used for production and preparation for transportation or delivery of [gas] including the following:
Associated production compression, gas lift, gas injection, or fuel gas supply.
(API Recommended Practice 80)
17 Definitions
11 Gas Gathering Line
A pipeline that transports gas from a current production facility to a transmission line or main. (49 CFR 192.3)
Gathering starts where production ends and ends when transmission starts.
The devil is in the details!!
Current Regulations
12
March 2006 Final Rule: Onshore Gas Gathering (49 CFR 192.8 and .9)
Uses American Petroleum Institute Recommended Practice 80 (API RP 80) as the basis for defining an onshore gathering line, with additional limitations.
Onshore Gas Gathering NOT regulated in Class 1 (Rural) Areas
18 Definitions
13
Liquid Gathering Line
Gathering line means a pipeline 219.1 mm (8 5/8 in) or less nominal outside diameter that transports petroleum from a production facility.
(49 CFR 195.2)
The devil is in the details!!
U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration
14
19 Definitions
15 A Liquid High Consequence area (195.450) means:
(1) A commercially navigable waterway, which means a waterway where a substantial likelihood of commercial navigation exists;
(2) A high population area, which means an urbanized area, as defined and delineated by the Census Bureau, that contains 50,000 or more people and has a population density of at least 1,000 people per square mile;
Definitions
16 A Liquid High consequence area (195.450) means:
(3) An other populated area, which means a place, as defined and delineated by the Census Bureau, that contains a concentrated population, such as an incorporated or unincorporated city, town, village, or other designated residential or commercial area;
(4) An unusually sensitive area, as defined in \ 195.6.
20 Definitions
17 A Gas High consequence area (192.903) means: (1) An area defined as- (i) A Class 3 location under \ 192.5; or (ii) A Class 4 location under \ 192.5; or (iii) Any area in a Class 1 or Class 2 location where the potential impact radius is greater than 660 feet (200 meters), and the area within a potential impact circle contains 20 or more buildings intended for human occupancy; or (iv) Any area in a Class 1 or Class 2 location where the potential impact circle contains an identified site.
Definitions
18 A Gas High consequence area (192.903) means:
OR
(2) The area within a potential impact circle containing-
(i) 20 or more buildings intended for human occupancy, unless the exception in paragraph (4) applies; or
(ii) An identified site.
21 Definitions
19 Gas Class Locations:
A Class 1 location is offshore or has 10 or fewer buildings intended for human occupancy within 220 yards in any one-mile segment
A Class 2 location is any class location unit that has more than 10 but fewer than 46 buildings intended for human occupancy.
Definitions
20 Gas Class Locations:
A Class 3 location has 46 or more buildings intended for human occupancy or any area where the pipeline lies within 100 yards of building or a small, well-defined outside area (such as a playground, recreation area, outdoor theater, or other place of public assembly) that is occupied by 20 or more persons on at least 5 days a week for 10 weeks in any 12-month period. (The days and weeks need not be consecutive.)
22 Definitions
21 Gas Class Locations:
A Class 4 location is any pipeline where buildings with four or more stories above ground are prevalent.
(PHMSA does not define “prevalent” nor does it specify the number (or percent) of buildings with four or more stories that make up a Class 4 location. If there is a question, it is probably Class 4.)
Definitions
22
Gas Transmission Lines (192.3)
Transmission line means a pipeline, other than a gathering line, that: (1) Transports gas from a gathering line or storage facility to a gas distribution center, storage facility, or large volume customer that is not down-stream from a gas distribution center; (2) operates at a hoop stress of 20 percent or more of SMYS; or (3) transports gas within a storage field.
23 Definitions
23
Liquid Transmission Lines (192.3)
Not defined!!
But
Interstate pipeline means a pipeline or that part of a pipeline that is used in the transportation of hazardous liquid or carbon dioxide in interstate or foreign commerce.
Definitions
24
Gas Distribution Lines (192.3)
Distribution Line means a pipeline other than a gathering or transmission line.
24 Issues
25
• FRACKING – Current Rules were not designed to address production in populated areas. • Current rules contain editorial flaws • Operator “misuse” of ambiguous language in RP 80 has allowed some circumvention of intended regulation in populated areas (RP 80 was not created for regulatory purposes)
Risk Basis
26
The 2006 rulemaking was based on the premise that gathering lines were small diameter/low energy lines – Eliminated political boundaries as method for determining which gathering was regulated
– Used Class location criteria (Class 2, 3, & 4)
25 Risk Basis
27
• “Shale” developments don’t fit that risk analysis – 8”- 30” diameter – 1480# MAOP
• 2 – 14 wells located on 1-2 acre sites
28
Gas Gathering installed in Fort Worth area 2005 – mid 2011 28
26 NAPSR Resolutions
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• Extend reporting requirements to all onshore gas gathering (‘06)
• Add leak survey requirements to Type “B” regulated (‘06)
• PHMSA modify 49 CFR Part 192.8 and 192.9 to establish regulatory requirements for gathering lines in Class 1 areas operating above 20% SMYS to be regulated as Type A gathering lines
NAPSR Resolutions
30
• PHMSA modify 49 CFR Part 192.8 and 192.9 to establish regulatory requirements for all gathering lines in Class 1 areas to be subject to 49 CFR Part 192.614 and 192.707 in order to minimize damage from 3rd party excavation; and
• PHMSA modify 49 CFR Part 192.8 and 192.9 to clarify its intent to establish a risk based regulation for the section of piping identified as incidental gathering in API RP 80. (‘10)
27 Gas Pipeline ANPRM
31
• 76 FR 53086 et. seq.; August 15, 2011; Docket No. PHMSA-2011-0023
• Comment period closed January 20, 2011
• Had a whole section just on Gas Gathering
• History of 192.8 and 192.9 included in ANPRM
Gas Pipeline ANPRM
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1. Part 191 Reporting for ALL gathering lines? 2. New definition for gathering lines? (shale) 3. Any Problems with API RP 80? 4. Special rules for large-diameter high-pressure lines in rural areas? Incidental gathering extension? 5. Special rules for landfill gas? 6. Enhanced internal corrosion requirements? 7. Gas IMP for gathering lines? 8. Cost/benefit for any changes?
28 Reauthorization
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Sec. 21. Gas and hazardous liquid gathering lines. – PHMSA is required to complete a review of all exemptions for gas and hazardous liquid gathering lines and make recommendations with respect to the modification or revocation of existing exemptions.
Reauthorization
34
Sec. 21. (continued)
Offshore (liquid) gathering pipelines would be subject to the same rules as other 49 CFR Part 195 lines unless PHMSA finds otherwise. (N/A to production or flow lines)
29 Possible Changes
35
• Subject all onshore gas gathering to the reporting requirements contained in 49 CFR Part 191 (satisfy #1 NAPSR resolution and collect data for future decisions)
• Develop and codify definitions for production and gathering
• Eliminate reference to API RP 80
Possible Changes
36
• Address editorial issues regarding end of gathering in Part 192.9 (satisfy #3 NAPSR resolution)
• Add leak survey requirements to Type “B” (satisfy #2 NAPSR resolutions) • Require OQ
• Who knows??
30 Timing
37 • Jeff Wiese, Associate Administrator for Pipeline Safety, consistently mentions gas gathering as a “priority” issue to address
• The Technical Pipeline Safety Advisory Committee Met December 12, 2012
• Mr. Wiese addressed gas gathering at that meeting (next page)
Timing
38
“But I wanted to assure you I think that we are all fully committed to move forward on gas gathering and liquid gathering as appropriate.
I think it is important to say that we don't seek, generally speaking, to take every square inch of every gathering line anywhere. It is if it creates a risk to people or the environment, I think that is something that is our job.”
(transcript, page 41, lines 2 through 10)
31 Timing
39 • My understanding is that a Notice of Proposed Rulemaking (NPRM) is currently scheduled for August, 2013
• I have been advised that PHMSA considers ex parte to apply once they have decided to propose a new rule (i.e., they are not allowed to talk about it until it is published)
• My guess is that it will be 2014 before the NPRM is published
Conclusions
40 • If it looks like a transmission line (large diameter, high pressure) it will probably be regulated like a transmission line even in Class 1 areas. • There is a good chance that RP 80 will be removed as an incorporated-by-reference standard. • It is likely that the definitions of where production ends and where transmission begins will be revised.
32 Questions
41
John Jacobi [email protected] (713) 260-4039 (Office) (832) 712-3098 (Mobile)
Thank YOU!!
33 Notes
This file is set up for duplexed printing. Therefore, there are pages that are intentionally left blank. If you print this file, we suggest that you set your printer to duplex.
34 Operations Management Systems Emerging use in managing risk and assuring compliance
Wiggin & Company, LLC Management Consultants
Discussion topics …
• Background on operating management systems • Systems architecture • The hype … the sceptics … the reality • Closing thoughts
2
35 Background …
An anecdotal view of the evolution of management systems …
Systems Thinking … Industry Bhopal Quality Organizational“ResponsibleSan Bruno Pipeline Care” Explosion Incident QualityInitial Management Formal Movement Learning … CorporateStandards Initial Regulatory SystemsCorporate Standards Culture Focus on Management Systems API RP 75 Management Systems Offshore 1990s Management Systems
2000s Emerging Focus on Integrated Management Systems
2010+
3 Overarching theme = systematic management of operations risk
36 Varied system elements …
ISO COSO
API 75 PAS 55
5
37 A simple example …
Our commuting objectives: ? Arrive without accident, on time, without speeding, cost-effectively ... every day Our “system” to achieve these objectives (or to reduce the risk of not achieving them), we: 1. Think about it ... plan the route ... watch the forecast for hazardous weather conditions ... ensure vehicle fit Plan for trip.
2. Leave on time ... listen to radio or GPS for traffic jams while driving ... do watch speed or set cruise Do control.
3. As we arrive, briefly check up on trip ... bad traffic? ... incident? accident risk high? Adjust trip plan for Check tomorrow.
4. Every so often, review our commuting program ... cost too high? too many accidents or tickets? Act to improve – ride the van? get a new job? Act 7 7
38 How do operational controls
fail? Controls/Barriers can disappear … • Due to lack of monitoring Small defects can become more • Due to lack of resources much larger … • Due to explicit decisions • Catastrophically • Slowly (creeping change)
Hazard Incident
Small defects can appear in operational controls … sometimes unnoticed
The end result is an incident … 9
What does a real failure in controls look like?
10
39 11 Pipeline accidents as a failure in operational controls
INGAA Integrity and Safety Initiatives
12
40 The hype .. the skeptics … the reality
13
The hype …
• A management system will add value regardless of the environment it is implemented in ... - That is, without regard to workplace culture issues • All that’s needed are some new procedures ... • If we get personal safety right, we’ll be successful in operating performance generally ...
14
41 1.8 15
1.56 1.6 1.44
1.4
1.22 1.2 1.18 1.2 Personal Safety Performance Improvement
1 0.84
0.8
0.6 0.6
0.44 0.43 0.43 0.39 0.4 0.27 0.25 0.19 0.2 0.13 0.10 0.09 0.08
0 87 88 89 90 91 92 93 94 95 96 97 98 99 2000 2001 2002 2003 2004
March 2005 15 Killed 170 Injured17
42 Texas City Thunder Horse
Alaska Pipeline Spill Alaska Pipeline Integrity
17
18
43 Baker Panel Report – January 2007 BP has not provided effective leadership or established appropriate operational expectations … for process safety management
BP’s decentralized management system and entrepreneurial culture have delegated substantial discretion … to managers without clearly defining process safety expectations, responsibilities, or accountabilities
BP has not implemented an integrated, comprehensive, and effective process safety management system …
BP has …mistakenly used improving personal safety performance … as an indication of acceptable process safety performance
[BP] does not ensure timely compliance with internal process safety standards … has not implemented an effective process safety audit system … does not ensure that identified process safety deficiencies … are tracked to correction
[A] lack of operating discipline, toleration of serious deviations from safe operating practices, and apparent complacency toward serious process safety risks existed …
BP has not established a positive, trusting, and open environment at some of its U.S. refineries with effective lines of communication between management and the workforce, including employee representatives
BP … does not effectively measure and monitor process safety performance 19
The skeptics …
• “Flavor of the month” - Just need to wait it out and it will go away • Organization is already suffering from “initiative fatigue” - This management system stuff will just make it worse • This is Voodoo or astrology, without scientific basis - Who’s to say it will work?
20
44 The reality …
• When management systems are well-designed, they can incrementally reduce risk over time, i.e., when they … - Leverage and build on in-place practices and culture - Are adequately resourced - Have explicit management support over long time spans • Management systems can also be tools to drive efficiency and cultural integration - Especially in a post-acquisition/merger operation - Really just another form of “continuous improvement” • Momentum has shifted - “Hiding” will not be a viable strategy much longer 21
Closing thoughts …
• Agencies are driving change • Recent incidents have focused the attention of Boards and executive offices on risk management and compliance assurance • Getting the operating discipline / conduct of operations message out to the field workforce is a tremendous challenge • A “common standard of care” is emerging … separate from agency action … that will dictate management action for implementing some sort of management systems to manage risk and assure compliance 22
45 Closing thoughts (cont.) ...
• The is generally no silver bullet … no “one-size-fits-all” solution - Systems should generally be tailored to fit with, and leverage, the in-place processes and culture • Management systems CAN be used to move cultures, over time, to support the emergence of a zero defect / zero incident operations environment
23
Operations Management Systems Emerging use in managing risk and assuring compliance
Wiggin & Company, LLC Management Consultants 25
46 Pre-Disaster Preparedness: Unique Challenges Faced by Oil and Gas CompaniesAccidents and Disasters
Presented By:
Brian Twellman Director The Claro Group
Jake Parsons Director The Claro Group
OverviewOverview