Low oil prices and a major slump in production are creating major safety concerns within the UK’s offshore oil and gas industry.
The UK’s offshore oil and gas industry looks to be in serious trouble. It has been in rapid decline for years, with many new projects being put on hold, or else being scrapped altogether.
According to Oil & Gas UK’s Activity Survey 2015, only 14 wells were drilled out of the expected 25 last year and between just eight and 13 wells are expected to be drilled this year.
If operators and contractors cannot operate safely they must not continue to work
HSE director of hazardous industries Susan Mackenzie
Former chief executive of Oil & Gas UK Malcolm Webb recently said North Sea oil and gas exploration can only survive if it makes cost and efficiency improvements of up to 40%.
These audacious figures are echoed in the governmentcommissioned Wood Review which calls for an urgent need to return production efficiency in the UK Continental Shelf (UKCS) to 70% - having fallen by 38% in the three years leading up to 2014.
But here’s the rub: when production drops off, cracks begin to appear elsewhere.
Chief among these cracks is the relationship between the offshore workforce and process safety.
Neil Smith, head of workforce development at sector skills body Cogent Skills, says enthusiasm towards process safety can often depend on the nature of the workforce.
“If offshore firms are operating with a significant number of contractors, for example, it is easier to lay them off when exploration and production is low,” Smith says.
“If you lose experienced workforce members, you may be losing corporate memory of past incidents – and that’s a real threat.”
When you strike-off more experienced members of staff, Smith says, there is an increased likelihood that less experienced engineers will make a serious mistake.
“That is one of the main reasons Cogent Skills is trying to encourage operators to invest in good process safety management programmes,” he says.
Unfortunately, the offshore industry’s coffers aren’t exactly bulging at the moment.
For instance, capital investment in the UKCS as set out in Oil & Gas UK’s Activity Survey 2015 is predicted to fall by as much as £3.5 billion in comparison to last year’s figures (£14.8bn), with 2016 fairing worse still, dropping a further £3.3 billion.
This is irrespective of the tax breaks laid out in Chancellor George Osborne’s Autumn Statement which, last year, saw the supplementary tax rate slashed from 30% to 20%.
So what’s to blame for the cash-flow issues?
The drastic fall in oil prices looks to be the main culprit.
At its peak last year, the price of oil hovered around the $115 (£74) ppb-mark.
But even then, when it could be argued that Brent Crude was selling quite favourably, the outlook for the UK’s offshore oil and gas industry remained bleak.
Today, oil prices are closer to $65 (£42) ppb, and don’t look to be recovering.
Again, in times of financial strain, safety can suffer.
Speaking at the Process Safety Summit in January, chairman of the Health and Safety Executive (HSE) Judith Hackitt said: “We know from past experience how low oil prices impact upon business’ thinking about process safety – and it’s not good.”
Fortunately, the HSE’s director of hazardous industries Susan Mackenzie says offshore safety is only affected by the price of oil if platform operators allow it to happen.
But, Mackenzie says there is a real concern that operators will opt to take the easy way out and cut back on maintenance, rather than reducing waste and investing in long-term, sustainable and safe production.
“However, I’m determined HSE inspectors will not let this happen,” Mackenzie says.
“They will focus on maintenance to ensure that safe production can be maintained,” she adds.
For Mackenzie, although the price of oil may have fallen recently, the standards required to protect workers’ lives have not changed.
“If operators and contractors cannot operate safely they must not continue to work. If they do operate unsafely, HSE inspectors will act to improve conditions or stop them,” she says.
Mackenzie is quick to point out that safety should always be an integral part of managing any business – particularly within the major hazard industries.
“Safety has to be part of the culture and part of the way assets are operated,” Mackenzie says.
“Operators must maintain a focus on what is key to their business and how they operate.”