The State of Safety in Oil & Gas Industry – 2018
Abridged from DNV Report 05/07/2018
We work safer now than ever before, but: “You can’t take anything we do for granted… “
Recently, a horrible accident happened at a small welding shop behind our offices here in Houston. In this shop worked two or three welders, each one an experienced hand with 20-30 years of welding experience. While one of the welders was heating up a sealed pipe, something went terribly wrong: the pipe exploded.
When the pipe blew, we heard a loud bang and screaming. In the pipe’s sudden explosion, the welder tragically lost his arm just below the elbow. The EMTs arrived by emergency helicopter and took the injured man to the hospital to be treated. Fortunately, the man would live; unfortunately, he might not weld ever again.
Our safety lead at RTS, Tom Anderson, called an Emergency Safety Meeting. “You can’t take anything we do for granted—we work in a dangerous environment,” he said.
The oil and gas industry has become considerably safer over the past two decades according to data from several industry bodies, such as the International Association of Oil & Gas Producers (IOGP), as well as national associations, including those in the UK, Norway, US and Australia.
Despite this, any time you work in a high-risk environment, accidents like the one at the welding shop behind us can occur. So, is enough being done to further improve safety in the oil and gas industry? Have recent market dynamics negatively affected investments in enhancing safety performance? And how aware are industry leaders of safety risks and incidents?
You just can’t be too safe.
Key Issue – Increased Risk Due to Reduced Maintenance Investment
According to the results of DNV GL’s 2018 Industry Outlook research, close to half (46%) of the 813 senior oil and gas professionals surveyed believe that too little has been invested in maintenance and inspection of installations and equipment in recent years. Some 38% said that safety management in the oil and gas industry is effective and does not need to change – 26% disagree, while 31% are neutral. This clearly shows that the industry is divided on the need to change safety practices.
It is also interesting to note that safety performance and investment increased during the strong growth years to 2014, but only risk increased through the challenging years that followed. We have heard where some companies inadvertently increased safety risk because of incentive programs that rewarded maintenance managers for being under budget on maintenance.
Certainly, many in the industry don’t believe that their business has made any compromises on safety. “The risk that we’ve got now, in the recovering market, is that companies forget about the underinvestment that they made,” says Graham Bennett, vice president, DNV GL – Oil & Gas. “Ramping up operations to take new opportunities can result in a worrying picture if companies don’t recognize the underinvestment made in the last few years. There is always a lag between periods of underinvestment and any associated safety impact.”
Downstream Sector Set to Invest More in Safety
In our survey, respondents from the downstream sector currently expect the highest increase in safety spending (41%) this year, compared with other parts of the industry. We also find the downstream sector to be more concerned about safety than other areas of the value chain. For instance, only 12% of respondents overall say that cost cutting over the past three years has increased health and safety risk, but this figure is nearly double (23%) in the downstream sector.
Digital Safety Measures Increasing
Many new investments in safety will be aimed at digitalizing safety monitoring, processes and responses this year. A clear finding from our survey is a significant increase in the proportion of respondents (54%) who intend to boost spending on digitalization in 2018 – up from 39% expected for 2017. Looking further ahead, over the next five years, 76% of respondents say they will invest in digitalization.
Already, even where cutbacks have been widespread, 40% say digitalization has improved safety over the past three years. “The industry has been a quick adopter of new technology and digitalization,” says Mr. Lu Nianming. “Technology has helped us improve safety monitoring systems, data analytics helps us determine which processes, areas and equipment are more accident-prone, while we have wearable equipment to monitor workers in case they faint or fall.”
A key advantage of digitalization in the safety context is that it can allow for the integration and transparent communication of hundreds of key indicators from across an organization. For example, DNV GL’s MyQRA service draws on data from quantitative risk assessment (QRA) reports to create a single source of safety data that can help all stakeholders generate deeper safety insights, better understand important safety signals, make decisions and predict future outcomes.
Senior Executives are More Positive About Safety Than the Field Engineers
Encouragingly, most survey participants (85%) say that safety risks and incidents are reported to senior management, and this figure rises to 91% among those working for companies with an annual revenue over USD500m. But how do perspectives on safety differ between those closer to the boardroom and those closer to the hazards?
Our survey found:
- Senior management (45%) are more likely than engineers and technical specialists (32%) to say safety management is effective and does not need to change.
- Nearly twice as many engineers/technical specialists (28%) as business leaders (15%) say that a focus on profitability has had a negative impact on safety performance.
- Most business leaders (65%) say that senior management understands the impact of cost cutting on safety, while just 50% of engineers and technical specialists say the same.
This indicates that those in the boardroom are, to some degree, more optimistic about safety than those in the field. While further research is needed to understand why this is the case, it suggests that senior leaders in the oil and gas industry could benefit from spending time better understanding the risks faced by those on the front line.
The Right Mindset: Perpetual Improvement
Overall, long-term trends indicate a strong improvement in the safety of oil and gas industry workers over time. The industry appears to be largely continuing this path, increasing investment and modernizing safety procedures and equipment. However, there are reasons to caution the optimism – from lower investment in safety in recent years, to the relatively higher concerns identified in the downstream sector, and by more junior and technical employees.
“Operators cannot afford not to maintain safety – they are aware, of course, that they can’t compromise in this area – I don’t really believe they are allowing maintenance or safety standards to slip,” says Frank Ketelaars, regional manager, Americas at DNV GL – Oil & Gas. “In fact, in many places the pressure to raise standards has increased.”
While zero risk is not achievable, much more can be done to stop preventable incidents. “We are in an industry that involves risks,” says Tom Anderson, Operations Director, RTS. “Safety incidents will happen no matter how much we do, but we can work to get the rate of incidents as low as possible. And to do that we must constantly focus on the need for improvements. Safety Matters Most.”