Embed Size (px)
Citation preview
Copyright © 2015 The Rapid Response Institute LLC. All Right Reserved.
The Rapid Response Institute www.theRRInstitute.com
“Meeting the Challenges of a Volatile World”
Implementing a Systemic Culture of Safety:
Experiences from the Upstream Oil & Gas Sector
Scott M. Shemwell, D.B.A.
Table of Contents This revised edition of the presentation delivered on November 2, 2015 at the IAEA Technical Meeting on Developing Improvement Programmes for Safety Culture, Vienna, Austria contains additional material in the Appendices for clarification and support of positions taken by the author.
• The Original Presentation in its entirety
• Appendix I—Additional Information
• Appendix II—Oil & Gas Safety Drivers
• Appendix III—SEMS Overview
• Appendix IV—Industry Transformation
• Appendix V—Economic Value Proposition Matrix® Model
• Appendix VI—OARS360 Overview
Disclaimer The views, opinions, positions or strategies expressed by the author and those referenced organizations and/or individuals are theirs alone, and do not necessarily reflect the views, opinions, positions or strategies of the conference organizer and affiliated organizations, sponsors, The Rapid Response Institute LLC, or any employee thereof. The author make no representations as to accuracy, completeness, suitability, or validity of any information contained herein and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its use. Moreover, the author does not endorse any of the organizations or products referenced in this discussion. Links to their web sites are provided only as a courtesy for those interested in additional information/research.
While much of the material has a USA focus, the same issues are being address globally!
Oil & Gas Value Chain
Upstream (E&P) Midstream Downstream
BP Macondo / aka Deepwater Horizon Incident
• April 20, 2010 o Game Changing Incident
o More than just another industrial accident
o Eleven deaths
o Lost of Transocean drilling rig ~$750 million asset
• Six Month “Deepwater” Drilling Moratorium o De facto ALL Gulf of Mexico shallow water drilling too
• Economic Impact – J.R. Mason
o Up to 19,000 jobs lost
o Wages lost ~ $1.1 billion
o ~ $500 million lost tax revenue
o At least one drilling company bankruptcy
o Environmental impact still unfolding
o + BP staggering costs!
• New / Onerous Regulatory Reform o Beginning with BOEMRE October 12, 2010
o Continuing on a Global Scale
Houston: We Have A Problem • Societal
o Legitimate Concerns o Not Just Poor Perception or
Misunderstanding o Not Just the USA
• Political o Both Sides of the Aisle o State & Local
• Engineering Process o Systemic & Complex o Extending Across Supply Chain
Risk Management
Now Bet-Your-Company!
Apollo 13 Damaged Service Module
What Are Operators Trying to Accomplish?
• Typical Statements
o Remote operations
o Run the field like a factory (Lean)
o Optimize Reservoir/Operations performance
o Make more money!
Crude Oil Spot Price vs. US Drilling Rig Count
(January - November 2008)
0
20
40
60
80
100
120
140
160
Sp
ot
Pri
ce (
US
$)
1550
1600
1650
1700
1750
1800
1850
1900
1950
2000
2050
2100
US
Dri
llin
g R
ig C
ou
nt
Weekly All Countries Spot Price US Drilling Rig CountSource: Oil & Gas Journal and Baker Hughes
Crude Oil Spot Price vs. US Drilling Rig Count
(January - November 2008)
0
20
40
60
80
100
120
140
160
Sp
ot
Pri
ce (
US
$)
1550
1600
1650
1700
1750
1800
1850
1900
1950
2000
2050
2100
US
Dri
llin
g R
ig C
ou
nt
Weekly All Countries Spot Price US Drilling Rig CountSource: Oil & Gas Journal and Baker Hughes
To Remain Profitable, Costs Must be Reduced
Faster than Production Declines
Production Decline Curve
Current Costs
Time
Opera
ting C
ost P
roductio
n R
ate
Current
Profit
Loss
Reduced Costs
Profit
Source: Strategic Decision Sciences
Production Decline Curve
Current Costs
Time
Opera
ting C
ost P
roductio
n R
ate
Current
Profit
Loss
Reduced Costs
Profit
Source: Strategic Decision Sciences
Create an Agile, Resilient, Sustainable Enterprise Maximize Shareholder Value
Market Realities
Reservoir Economics
The Economic Value Proposition Matrix® Model
Translate Technology to the
Language of Business
Buying Influences
• Economic • Technical • User • Coach
Source: Miller Heiman
Relevant Uses Include: • Investments in IT aka Digital Oilfield • Security Investment Value Analysis • Safety and Environmental Analysis
High Demand at current Crude Oil Price!
After 2010 In July 2010, Shell, Chevron, ConocoPhillips and ExxonMobil committed to
providing a new containment response capability for the U.S. Gulf of Mexico.
Systemic Risk Management • Systemic vs. Occupational Only
o Systemic • Man, Machine, Process, Environment
Interface
• Holistic - More than Fault Tree Analysis
• Linkages are Weak Points o Include Supply Chain Linkages
• The Best Perspective
o Occupational • Simplistic
• Slogans and OSHA “like” reporting
• Good not Great (or acceptable today)
• Systemic is ONLY Viable Approach o Real Time Systems (Smart Equipment)
o Appropriate Human Training
o Human Factors & Behavioral Economics
Safety & Environmental Management Systems
• Required for US Federal Waters Operations
• Soon Everywhere
• Integrating SEMS into Operations Management Systems (OMS)
• Independent Audit
High Reliability Management
Characteristics of a Robust Safety Culture
In a culture of safety, people are not merely encouraged to work toward change; they take action when it is needed. Inaction in the face of safety problems is taboo, and eventually the pressure comes from all directions — from peers as well as leaders. There is no room in a culture of safety for those who uselessly point fingers or say, "Safety is not my responsibility, so I’ll file a report and wash my hands of it."
-- Institute for Healthcare Improvement
• Leadership • Problem Identification and Resolution • Personal Accountability • Work Processes • Continuous Learning • An Environment for Raising Concerns • Effective Communications • Trust and Respect • Inquiring Attitude
-- James A. Watson First Annual COS Forum
Since Each Organization has a Culture of Safety, there are Thousands of Culture of Safety in the sector!
Technology Solutions Enabling Successful Cultures of Safety
Operations Management System • More than a Website or Policy • More than a Checklist • Seamless across the Supply
Chain • Standards & Regulations in the
Work Flow • Cloud-Mobility Enabled • Automatic Audit • Risk Mitigation • ISO/IEC 17021 – Conformity
Assessment
90% of field operations personnel are contractors
People Resist Change
Change Management • Defined Process
• Three Step o Initial
o Staged
o Sustained
• Specific to ME!
• Cross Culture Negotiations
• Resistance Management
• Online/Game Version Available Soon
Towards a Culture of Safety • Competency Assurance
o More than Just Training
o More than Record Keeping
o Organizational Commitment
o Demonstrable
• Change Management is a Proven “Iterative” Process o Awareness & Education o Pilot Projects o Wide-Spread Integration
• Good Practices Available o Inside industry o External
Implementation Guidelines Transformation Sustaining
Self Assessment Guide Quick Assessment anyone can conduct Ten Minutes or Less
COS Maturity Self Assessment • Online Global Survey
• February 2015
• n=197
• Oil & Gas Companies
• Engineering
• Service Companies
• Management
• Engineering
Even for those companies meeting the Level V Maturity, keep in mind that many of the
organizations in the supply chain and working next to you in the field may not be meeting
these criteria.
By the Scoring Definition, this may change the Maturity Level of the Actual Operation or
Project.
Other Technology Enabled Solutions • Near Miss Reporting—BSEE
• COS Initiatives o Activity SPI: a forward looking measure that
can give early indication of the performance of a barrier and can help explain why a desired result was achieved or not.
o Outcome SPI: a retrospective measure based on the result of an activity or incident
• Competency Assurance—IADC
• Comprehensive, Full Life-Cycle Contractor Management
Bowtie Model
Operational Excellence “No Compromise to Safety, Compliance or Operational Performance”
- International Oil Company
Cost Reduction Strategy, 2015
Today’s Major Critical Issues • Significant Crude Price Decline
o Severe Financial Crisis
o Large Reduction in Force
• Operational Excellence is a Focus o Pressure on Management and Technical Staff
o Layoff Results in loss of Key Industry Knowledge
o Merger & Acquisitions
• No Relief from Regulators or Public o Culture of Safety is Mandatory
o All Economic Participants ~4,500 companies
Some Key Trends • API RP-75 Recommended Practice for Development of a Safety and
Environmental Management Program for Offshore Operations and Facilities Update o Contractor Management o IT / Cybersecurity
• Operations Management Systems Emerging o Competency, Safety, Cost Reduction
• Technology Development Continues o Water Management
• Mergers & Acquisitions • Disruptive Big Data
o $115 million in 20 VC oil & gas deals in 2015
Oil and gas is one of the last giant industries yet to be fundamentally disrupted," said Reid Calhoon, RunTitle's chief executive officer.
This Has to Change! • Challenge to a New Generation
• Complex Energy Infrastructure Critical for the Global Economy
• Societal Intolerance
• License-to-Operate At Risk
• Cost of Failures are High & Real
• Not Just Oil
Appendix I Additional Information
Background
Definition of Culture (a Checklist) 1. Culture consists of ideals, values, and assumptions about life that guide specific behaviors. 2. Culture consists of those aspects of the environment that people make. 3. Culture is transmitted generation to generation, with the responsibility given to parents, teachers, religious leaders, and other
respected elders in a community. 4. The fact summarized in point number 3 means that there will be childhood experiences that many people in a community remember
happening to them. 5. Aspects of one's culture are not frequently discussed by adults. Since culture is widely shared and accepted, there is little reason to
discuss it frequently. 6. Culture can become clearest in well-meaning clashes. This term refers to interactions among people from very different backgrounds.
They may behave in proper ways according to their socialization, but there is a clash when the people from different cultures interact. 7. Culture allows people to "fill in the blanks" when presented with a basic sketch of familiar behaviors. 8. Cultural values remain despite compromises and slip-ups. Even though people can list exceptions, the cultural value is seen as the
constant that continues to guide specific behaviors. 9. There are emotional reactions when cultural values are violated or when a culture's expected behaviors are ignored. 10. There can be acceptance and rejection of a culture's values at different times in a person's life. Common examples involve rebellious
adolescents and young adults who accept a culture's expectations after having children of their own. 11. When changes in cultural values are contemplated, the reaction that "this will be difficult and time consuming" is likely. 12. When comparing proper and expected behavior across cultures, some observations are summarizable in sharp contrasts. Examples
are the treatment of time, the spatial orientation that people adopt, and the clarity (versus lack thereof) of the rules and norms of certain complex behaviors
Brislin, Richard. (1993). Understanding Culture's Influence on Behavior. Fort Worth: Harcourt Brace.
Codicil • Books available on Amazon • PennEnergy Governing Energy Blog • Take the Culture of Safety Self
Assessment • Monographs • See Our Website for Links www.theRRInstitute.com
The Rapid Response Institute • Scott M. Shemwell, D.B.A.
o Career in Upstream Energy Services and use of IT • COO of small public energy
services company • Former member of Halliburton
Energy Services Leadership Team • Former Oracle Executive
o Early in DOF o Technology Sales to Petroleum Industry
• 30 + Years • More than $1 Billion in Revenue
Generated o Author and Speaker on the global stage
• Enabling our clients to posture themselves in their market segments so that they can thrive in volatile markets and capitalize on uncertainty, not suffer because of it
• Organizational Agility, Resiliency, Sustainability
www.theRRInstitute.com www.OARS360.com
Contact • Scott M. Shemwell
• www.theRRInstitute.com
• +1.281.414.6958
Appendix II Oil & Gas Safety Drivers
New Safety Culture Realized
Asset Integrity Management “Asset integrity is related to the prevention of major incidents. It is an outcome of good design, construction and operating practices.
It is achieved when facilities are structurally and mechanically sound and perform the processes and produce the products for which they were designed.”
OGP Asset Integrity—the key to managing major incident risks
Applicable Across the Energy Value Chain
Systemic Asset Management Business Model • Holistic Perspective
• Aligned with Business Imperatives
• Multiple Constituents o Internal
o External
• Life Cycle View
• Process Enabled o Knowledge
o Information Intensive
o Risk Mitigation
Source: Institute of Asset Management
Systemic Asset Management Business Model • Holistic Perspective
• Aligned with Business Imperatives
• Multiple Constituents o Internal
o External
• Life Cycle View
• Process Enabled o Knowledge
o Information Intensive
o Risk Mitigation
See ISO 55000
Risk Management
Extending the Risk Model
• COSO 4 Categories of Risk (COSO, 2004)
o Alignment with Strategic Goals
o Effective/Efficient Use of Resources
o Reliability of Reporting
o Compliance
• Safety Case
• Formal Safety Assessment
• Process Hazards
• Includes Supply Chain Committee of Sponsoring Organizations (COSO)
Risk Assessment Matrix
Asset and Equipment Integrity Governance
A New Approach towards Mitigating Operations Risk
See our White Paper on this subject
Corporate Governance; circa 2002
•Public companies fought Sarbanes Oxley o Now the Law of the Land
•Additional Benefit of SOX o In 2002, McKinsey / Global Corporate Governance Forum
• Over 75% of 200+ fund managers would be willing to pay more for stock in companies with strong governance.
• North America and Europe market value averaged 12-14% higher for firms with strong shareholder rights
o By 2005 this gap had closed
What is Governance? • “Corporate governance is the system by which companies are
directed and controlled.” (Cadbury, 1992)
• “The corporate governance framework should ensure the strategic guidance of the company, the effective monitoring of management by the board, and the board’s accountability to the company and the shareholders.” (OECD, 2004)
• Hyper mode since The Sarbanes Oxley Act of 2002
Why Strong Governance is Important:
Some Notable Failures in Governance
Barings Bank (1762-1995)
Collapse was due to the unauthorized and ultimately catastrophic activities of one individual trader.
Bernard L. Madoff Investment Securities LLC (1960-2008)
Elaborate securities fraud Ponzi scheme.
Enron (roots to 1932-2001)
A number of high visibility scandals, often seen as the most notorious in American history. Prior to its bankruptcy on December 2, 2001, the company employed 22,000 with energy related revenue of almost $101 billion in 2000.
MCI WorldCom (1997-2004)
Accounting fraud and insider loans led to the Chapter 11 bankruptcy in 2004.
News of the World, UK (1843-2011).
News International announced the shut down of this organization on July 7, 2011 following an extensive phone hacking scandal
Royal Dutch Shell (1907-Present)
In 2004 Shell overstated its oil reserves, resulting in loss of confidence in the group, a £17 million fine and the departure of the chairman Philip Watts. A lawsuit resulted in the payment of $450 million to non-American shareholders in 2007.
UBS AG (1912-Present)
The Zurich, Switzerland banking giant, UBS AG disclosed on September 15, 2011 that a trader at UBS Investment Bank in London had lost $2.3 billion through unauthorized trades.
These Are Financial Transparency Issues
Identified Gap in Governance Models
• Typical Models
o Capital Market Driven
• Financial Transparency
o Information Technology
• What About Field Operations?
• What About Your Supply Chain Partners?
• Need Driven New Compliance Requirements
o All Sectors but Mostly Heavy Industry Infrastructure
• Need to Extend the Governance Model
• Must be Able to Implement
o Internal
o External Parties
o More than SOP and Contracts Management
• Aligned with the Firm’s Strategy
Policies & Procedures
• Compliance Management Influencers
• Compliance Management Matrix Model
• Compliance Policy Automation
Compliance Policy Automation
Integrated Compliance
Management Framework
Compliance Management Matrix Model
• RELATIONSHIPS, BEHAVIORS, and
CONDITIONS (RBC) Model (Shemwell,
1996)
o Relationships are the focal point
o Behavior is defined as a broad term including multi-dimensions / multi-cultural
o Conditions are defined as active and including circumstances, capabilities and skills of the parties, culture, and the environment
• Integrated yet Diverse Supply Chain o Just-in-Time
o Deepwater US
• Roots in Negotiation and Game Theory
Think of the Supply Chain as Cross/Multi-Cultural
What Other Sectors are Doing Two Case Studies
US Navy SAFESUB: Compliance Management Influencers • Develop, acquire,
modernize and maintain the world’s best submarines
• Post USS Thresher, 1963
• Throughout the Asset Life Cycle
• Certification & Audit Process
• Affordable
• Required for ALL Parties
Submarine Safety is the responsibility of all parties involved, from the manufacturer of the raw material, through installation and test onboard a nuclear submarine. The lives of the US Navy sailors depend upon compliance to the strict guidelines of the Submarine Safety (SUBSAFE) Program.
Note: Information from public sources
• Founded in 1968, the North American Electric Reliability Corporation (NERC) is the self-regulatory Electric Reliability Organization (ERO) that spans North America, with Federal Energy Regulatory Commission (FERC) oversight.
• NERC's mission is “to ensure that the bulk electric system in North America is reliable, adequate and secure.”
o develops and enforces reliability standard
o monitors the bulk power system; o assesses future adequacy; o audits owners, operators, and
users for preparedness; o educates and trains industry
personnel.
NERC
The Power Grid: Compliance Automation
Courtesy of Oracle
Appendix III SEMS Overview
How the Industry Implemented this Regulation and the Future
Typical Operator Operations Management System (OMS)
Safety & Environmental Management Systems (SEMS)
• Center for Offshore Safety o Formed in Response to Macondo
o API division works closely with BSEE
o Focus on SEMS
o Modeled after other Sectors
• New Regulation Post Macondo
• Required by BSEE
• Based on API RP- 75
• Independent Audit Requirement
• Management System
• Based on API RP-75 o 17 Elements
o Plus Bridging Document (WCID)
• Required for US Federal Waters Operations
• ISO/IEC 17021 – Conformity Assessment
SEMS Compliant OMS High Level Integration Model
• General Provisions
• Safety & Environmental Info
• Additional
Leadership
• Training
• Operating Procedures
• Additional Organization
• Safe Work Practices • Hazards Analysis • Additional
Risk
• Management of Change
• Emergency Response & Control
• Additional
Procedures
• Quality & Mechanical Integrity
• Pre-Startup Review • Additional
Assets
• Training
• Quality & Mechanical Integrity
• Additional
Optimization
• Incident Investigation • Records /
Documentation • Additional
Privilege to Operate
• Audit • General Provisions • Additional
Results
O M S E l e m e n t s
S E M S E l e m e n t s
Appendix IV Industry Transformation Thoughts on the Safety Culture Change Management Process
A Few (of Many) Seminal Events Other
• Fukushima, 2011 o Global Review of Nuclear Energy
• San Bruno Pipeline, 2010 o Pipeline Integrity Management
• Phillips Chemical, 1989 o Mary Kay O’Connor Process Safety
Center at Texas A&M
• Bhopal, 1984 o CEO Indicted
Offshore • Piper Alpha, 1988
o Lord Cullen Report (106 recommendations)
• Exxon Valdez, 1989 o Oil Pollution Act of 1990
• BP Macondo, 2010 o SEMS
• Black Elk, 2012 o Poor Track Record
• Walter Oil & Gas, 2013 o Focus Shifts to the Continental Shelf
Our Post BP Macondo World • Seminal Moment—
”Game Changing”
• CEO is now directly accountable for field operations!!
• Complex Energy Infrastructure
• Systemic Risk of Complex Infrastructure
• Massive Industry Response
• Societal Intolerance for business as usual
Industry is taking dramatic steps to assure that this never happens again—anywhere!
If it does the response will be rapid & impactful!
High Reliability Management
High reliability management in process industries: Sustained by human factors
Appendix V Economic Value Proposition
Matrix® Model Translate Technology to the Language of Business
Traditional Methods of Explaining Value
• Feature -- Benefit • Product focuses
• “This coffee cup is made of ceramic and holds heat better than plastic”
• Does NOT truly Differentiate
• Value Proposition • “My solution will increase your
net income by 75%”
• Often
• Overstated
• Not Demonstrable
• Not Defendable
Actual Benefit Statements • Taken from a recent
presentation
• Mid size software firm • Established company
• Business Process Management space
1. Has He or She Garnered Your Trust? 2. Would You Buy from this Sales Representative? 3. What is the Credibility of the Firm Represented?
• “Decreased human errors by 100%”
• “Reduced losses from 8% per month to less than 1% per month through sales order process automation”
• “Gained ability to monitor inventory process in real time”
• “Improved control over XXX delivery process and reduced manual work by more than 70%”
• “50% increase in the daily processing of orders”
• “Enhanced credit control system for partners through increased information visibility”
The Economic Value Proposition Matrix® Model
Translate Technology to the
Language of Business
Buying Influences
• Economic • Technical • User • Coach
Source: Miller Heiman
Brief History • Developed Over a Decade
• Extensive CAPEX Assessment with Super Major Oil Company, circa 2000
• Early Digital Oilfield of the Future Valuation
• Vetted by over 50 Major Clients • Oil & Gas Operator
• Major IT Firms
• Major Industrial Products Firms
• Addresses the Real Concerns of Clients • Measureable Value
• Directly Addresses Intangibles
EVPM Process • Problem Identification and
Assessment • With Client
• “Straw man” Proposal
• Components of Value Determined and Measured • Tangible
• Intangible
• Financial Model
Components of Value Category Definition Example
Cost Takeout Completely eliminating a specific activity or process Redeploying a resource from a non value-added activity to a value-added activity
Cost Avoidance Identifying and correcting an error that was not budgeted for correction but would have caused an expense had it not been corrected
Correcting an engineering design flaw before the flaw goes into production.
Productivity & Efficiency Gains
Increase in productivity that improves existing resource utilization.
Removal of a bottleneck that is causing capacity restraint
Correcting a process to allow more productive time by shifting from wait time to production time
One-time Cash Flow Impact
Decreasing and or eliminating one-time cash flow impact Elimination of redundant information/data stores Monetize Capital
Intangible Benefits that improve operations of the business and /or are necessary to control, protect and enhance company assets, but are not quantifiable due to the nature of the area being improved
Improvement of communications between different operational units/supply chain
Reduced small equipment shrinkage
Actual Customer Solutions • CAPEX IV&V
• Global IT Infrastructure Assessment
• Engineered Equipment Sales Initiative
• Investment Initiative by Unconventional Oil Co.
• Business Plan Presentation to Venture Capitalists
• Multiple CAPEX Project Assessments • Global $300 Million Infrastructure
• Oil & Gas
• Information Technology
• Solutions for Multiple Sales & Marketing Initiatives • Security in North Africa
• Digital Oilfield Collaboration with Oil and Gas Client
• Equipment for Offshore E&P
• Large Scale IT
Demonstration • Online Version
• Digital Oilfield
• CAPEX
• Demo Website
• Three Part PennWell Article
License EVPM • Standard Version
• Up to 20 Input Variables
• Post Completed Model to your website at no additional charge
• Great for Product Line Managers and Sales Representatives
• Fully Documented and Training provided
• Up to 3 hours of online consultation with Dr. Shemwell—provided over GoToMeeting, so invite your whole team
• Single Solution/User License
• Enterprise Version • Unlimited Use
• Contact us for a proposal
Appendix VI OARS360 Overview
Actualizing Operations Management Systems
Background
• OARS360 is a Spin Out of The Rapid Response Institute—focus on Operations
– First True Operations Management System
– SEMS Enabled
– Culture of Safety
• Third Generation—developed with Industry
90% of field operations personnel are contractors
Compliance Management
Risk Mitigation
Ensuring Safety
Driving Operation Efficiencies
Study: Actual costs are 4X engineered projections
Violations: 1667 in 2011 Reported: 545 oil field deaths (2008-12)
Estimate: $200M negative impact on companies
O&G Field Operations - Challenges OARS360 – Operational Agility & Resiliency System
Collaboration
Document Management
Maintenance Management
Asset Management
ERP
Complexity Creates Opportunity
Existing solutions limit operations effectiveness
Oil & Gas Field Operations today:
• Extending/leveraging existing tools
• Managing Spreadsheet checklists
Resulting in the following problems: • Critical field operations data in silos
• Manual consolidation/reporting
• Limited actionable information
• Operations lacks real time visibility Field Operations
Firewall
Emp
loye
es
Contractors
Collaboration
Document Management
Maintenance Management
Asset Management
ERP
Our Value Proposition
Providing a comprehensive 360⁰ view of operations
Field Operations
Firewall
Emp
loye
es
Contractors
OARS360 is a Operations Management System (OMS) that:
• Interfaces with all existing tools
• Provides real-time reporting and visibility
• Maintains audit history of all field activities
Delivering the following benefits
• Real time actionable information
• Improved operational efficiency
• Compliance management
• Enhanced safety of field personnel
OARS360
