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Downturn Or Upturn, HSE Practice Is Indispensable For Oil & Gas Sector

Featured in June, 2017 Edition By Alok Raj Gupta
The growing relevance of the words health, safety and environment (HSE) is fast pulling up their importance as well. I can’t think of any other industry where occupational HSE is more critical than the oil and gas industry. There is no doubt that there are many quarters still who are yet to recognize the value of HSE preparedness, and hence this article is going to serve the purpose of unveiling the indispensability.

As mentioned earlier, workers in the oil and gas industry are the most vulnerable to the health, safety and environmental hazards given the nature of operations. The table below encapsulates the HSE impacts, impact channels, source activities and type of oil & gas operations.

HSE Hazards in Oil & Gas Sector
Source: Adapted from Safety and Health Management System in Oil and Gas Industry, Wipro Technologies
Oil & Gas Operation Activities Impact Channel HSE Impact
Upstream Upstream Seismic Survey and evaluation; Exploration and drilling; Development and production; Decommissioning Pathogenic microorganisms; Infection transmitting vectors; Drilling mud; Petroleum products (Hydrocarbons); Radioactive sources; Chemicals and additives; Metals (Pb, Cd, Mn, etc.); Extreme temperatures; Silica/Asbestos; Noise/Vibration; Mechanical; Ergonomic; Psychosocial Infectious and parasitic diseases (e.g., Hepatitis A, Cholera, Typhoid fever); Cumulative trauma disorders; Chronic obstructive pulmonary Disease; Gastrointestinal disorders; Dermal and eye issues; Spinal disorders; Neoplasms/Cancer; Heat Stroke; Stress; Sleep deficits; Noise induced hearing loss; Drug and alcohol abuse
Midstream Pipelines; Transport and storage; Marketing Petroleum products (Hydrocarbons); Dust from filing and scaling (from cleaning of pipes and tanks) Dermal and eye issues; Pulmonary disorders; Gastrointestinal disorders; Neoplasms/Cancer
Downstream Product Refining; Petro chemicals; Sales and Distribution Petroleum products (Hydrocarbons); Treatment chemicals; Metals (Pb, Cd, Mn, etc.); Silica/Asbestos; Solvents; Noise/Vibration Dermal and eye issues; Gastrointestinal disorders; Neoplasms/Cancer; Noise induced hearing loss
When should the decision makers realize that it’s time to do something about HSE practice at their organizations?

♦ When the firm is scaling up its operations, the firm would expand itself in a new space with new boundaries. Old set of HSE policies may become ineffective to fortify never-faced-before challenges sitting on new boundaries.

♦ When the compliance alarm goes up and you don’t have a well rounded HSE policy in place. Companies have, typically, invested as much time and resources as minimally required. When statutory need either goes up or is likely to go up, it is better to promptly step up on the HSE front.

♦ When pre-existing HSE function has evolved into one overloaded vertical including other aspects of human resource management, sustainability, CSR etc., resulting in dilution of original HSE objectives.

I would now like to describe a top level approach which can define the outline of HSE policy within oil and gas industry. I called the PACE strategy, where ‘plan’, ‘act’, ’check’ and ’evaluate’ make the acronym. A detailed HSE practice can be established just by detailed each of these four components.

HSE PACE Strategy
Source: Energy Intelligence Unit, Research & Advisory Division, ENVECOLOGIC

To begin with, ‘P for plan’ can be expanded to ‘Preventive Pre-empted Plan’. This requires benchmarking HSE risk beforehand to come up with a safeguarding plan. This includes developing the HSE roadmap against the backdrop of the specific value chain in question. Additionally, risk mapping must also be done and priority areas must also be flagged during this stage itself. Next, ‘A for Act’ essentially means acting upon the roadmap laid down at the planning stage. The HSE-Value Chain-Risk mapping allows for a further detailing of the plan leading up to action items to undertake management of specific areas such as training, safety equipment, waste and emission management, compliance etc. Subsequent to the execution stage, comes ‘C for check’, the need to look for lapses in execution through monitoring and auditing. This stage will be meaningful only when unambiguous key performance indicators (KPIs) have been pre-defined. Finally, the top management must review and ‘evaluate’ the company’s HSE practice and the resulting effectiveness. It is the stage where strategic direction must be set with respect to a continuous action plan.

The most pertinent point that HSE professionals reading this article would make at this point is that HSE practices must take a back seat (in terms of scaling up) until oil & gas prices revive and overall pressure on margin is somewhat relieved. This is where the greatest chances of making a mistake exist. HSE practice must be a part of a company’s long term strategy not short term quick-fix plans resting on the fate of business cycles. It does not give tangible return but functions like an insurance scheme. It is the biggest risk minimizing tool. If we don’t pay premiums in terms of HSE investment, post-incident can cost the firm dearly.

The implication of lackluster hydrocarbon should not result in stagnating or even scaling down HSE activities but managing the associate costs better. It is worth referring to a piece of study conducted by Accenture Consulting on improving energy sector operating costs. The analysis concluded that cost cutting efforts lead to only 5-10% cost savings whereas cost management may result in up to 30% cost savings.

As far as investment in HSE is concerned, taking into account some cost management points can go a long way in guarding the oil & gas company against occupation hazards, during the low price environment. So the first step in effective cost management is for the company to improve its understanding of its costs and their drivers. Raise the approval level for expensive, non-recurrent costs, in order to encourage managers to spend sufficient time preparing a business-case justification before asking their superiors for approval. Rely on tried and tested procurement strategies such as bulk and bundled procurement of PPE or safety equipments to save costs. Investing skilling and training can promise better RoI as compared to spending on sophisticated and expensive monitoring systems and dashboards. In no capacity, I intend to undermine the utility of sophisticated systems, however, we must evaluate marginal returns at the time of resource constraints.

Hence, whether in good times or bad times, one should lose sight of the importance of HSE practice, particularly in the oil and gas sector, given the perilous nature of the industry. It is time that we go beyond treating HSE norms as just a part of corporate policy, but look at developing the practice into a culture which defines the corporate entity as much as its products and services do.

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