The state of process safety and operational risk management

In this exclusive version of the 2018 edition of Petrotechnics’ global process safety (PSM) and operational risk management survey (Fig. 1), insights of upstream oil and gas industry leaders are shared, regarding the oil price downturn, knock-on budgetary squeezes, the real-world experience of safety and risk and where that exceeds or falls short of expectations, as well as the relationship between safety culture, human factors, technology, and engineering practices.

Fig. 1. The 2018 global process safety (PSM) and operational risk management survey reveals how senior leaders perceive operational risk and process safety management.

 
PSM AND THE OIL PRICE IMPACT

Perhaps not surprisingly, the price of oil continues to be a contributing factor to process safety risk: 88% of upstream survey respondents believe the oil price has had a moderate or significant impact on process safety risk, Fig. 2. Not only that, 71% said reducing operational and major accident hazard risk is the main driver for improving safety performance.

Fig. 2. The price of oil continues to be a contributing factor to process safety risk.

These findings reflect the 25th edition of Marsh & McLennan’s 100 Largest Losses Report, which indicates no discernible downward trend in major accidents and little evidence of improvement. Regarding the effect of low oil price on upstream assets, divestment by some majors has led to older assets being taken over by smaller organizations—in some cases with limited experience in the oil and gas sector. Marsh suggests, “It is important that these new entrants maintain the competency to understand the risks associated with the assets that they have acquired.”

SAFETY CULTURE & RISK AWARENESS

The good news is that 85% agree that safety is part of their corporate value structures and is supported by the highest levels of management, including the company president or CEO. In addition, nearly two-thirds (63%) agree that companies have a defined roadmap and goals for advancing safety performance.

However, when asked about the top challenges when delivering effective process safety management, 69% reported safety culture and overall risk awareness. This is a critical point. For some time, the management systems approach, coupled with softer leadership skills, has been an area of focus when it comes to improving safety and business performance—yet incidents still arise.

There is much room for the industry to do more to empower decision-making throughout the organization and to enable a better application of that culture and improved management of risk.

A GROWING GAP BETWEEN INTENT AND REALITY

One troubling area of growth is the increasing disconnect between the intent of process safety design and what happens on the ground. This also could be described as the growing gap between corporate culture and daily reality.

This gap between intent and reality was a major theme of our process safety reports over the years, and it appears to have widened. This year, 88% of survey participants said they believed there were gaps between how process safety was intended and what actually happens on the asset.

Plenty of other indicators from the survey illustrate intention and reality remain out of alignment. For example, only 39% said that people typically maintain a sense of vulnerability about their exposure to major accident hazard risk.

SOUNDING THE ALARM

The numbers show that, for many, the attitude toward PSM is unrelated to business performance. Only 36% believe that organizations proactively manage process safety, Fig. 3. What’s more, a startling 61% are not monitoring and managing impaired process safety barriers, and another 61% are not monitoring and managing deviations from management system requirements or expectations, Fig. 4.

Fig. 3. The numbers show that, for many, the attitude toward PSM is unrelated to business performance.

Fig. 4. Essential systems can get lost in the budgetary squeeze, leaving firms unable to effectively prioritize maintenance and operations in the face of changing conditions and evolving risks.

This takes us back to the link between safety performance and oil price—with a particular focus on the well-documented job losses that followed in the wake of budgetary constraints. Although safety culture is embedded in the corporate value structure and is embraced by senior management, organizations may well be seeing the impact of massive job cuts, the ensuing loss of corporate memory and operational experience, cost-cutting and overall belt-tightening brought on by the downturn in oil prices.

The risk here is that essential systems—such as monitoring and managing impaired process safety barriers—get lost in the budgetary squeeze, leaving firms unable to effectively prioritize maintenance and operations in the face of changing conditions and evolving risks. Inevitably this has a deleterious effect on safety performance. With the previously stated concerns about the gap between process safety intent and day-to-day reality on the front line, it adds weight to our opening premise: the oil price is affecting the industry’s ability to manage process safety risk effectively.

TECHNOLOGY INVESTMENT TO DRIVE CHANGE

According to independent research firm, Verdantix: “Delivering the full operational risk value proposition is a complex technology challenge” in which organizations have to fulfill the following four requirements:

• Aggregate data from asset management databases, safety reports and equipment
• Model asset performance and barrier health with near real-time data feeds
• Analyze interactions between workers, equipment and external factors
• Engage user groups with a variety of roles and requirements

Furthermore, improved use of technology is vital and should be imbedded in every organization.

The majority (77%) of respondents say organizations use enterprise asset management (EAM) or maintenance management systems (MMS) as key components for delivering process safety and operational risk management. A further 69% said they used environmental health and safety software (EHS); 54% said they used asset performance management (APM) systems; and 42% reported using enterprise resource planning (ERP) solutions. However, many of the systems used today, to ensure the delivery and upkeep of process safety design intent, are primarily built and implemented to perform or support other tasks, or they manage safety and risk as separate processes—divorced from the day-to-day operational reality. Therefore there is little scope to manage or monitor risk status or deliver tangible improvements to process safety within these applications, simply because they are not designed to do so.

What is needed is a software layer that can glue together disparate systems and present a common view of risk, regardless of the business system producing the risk data. Technology investment plays a significant role in engaging the frontline workforce to manage work-related hazards and reduce the potential for adverse events. In particular, technologies that digitize cumbersome processes, remotely monitor equipment and run analysis of operational data in near real-time, can help to keep risks under control and boost production.

Industry 4.0 technology platforms give users the ability to digitalize the knowledge, status and experience contained within organizations and people, making the information available in easily digestible, visual formats through readily accessible systems and devices. A digital view of the operational reality unlocks greater efficiency, effectiveness and consistency that operators are looking for while minimizing operational risk. As Verdantix says, “Putting a digital twin modeling capability at the heart of technology has the potential to transform the ORM value proposition.”

ORM digital twin solutions are already making a big difference for organizations, from being able to link safety cases to deviations and management systems, to developing an integrated view of process safety and operational risk management systems.

Fig. 5. The use of advanced digital technologies is expected to increase significantly in the future, according to upstream industry leaders’ projections.

 
The use of advanced digital technologies—such as IoT platforms, digital twins, predictive analytics and mobile workforce applications for managing process safety and operational risk—will increase significantly in the future. In fact, upstream industry leaders project 500% growth in solutions that simulate “what if” scenarios; 357% growth in those that deliver advanced analytics to make safety improvements; 210% growth in solutions that provide a single, shared view of the operational reality; and 200% growth in field mobility to improve frontline safety, Fig. 5.

A BRIGHT DIGITAL FUTURE

The good news is that technology strategies are being discussed actively, with a strong intent to improve process safety. Seventy-three percent of upstream industry leaders said technology would make companies and their work teams safer by reducing vulnerability to high-potential near misses and major hazard events.

In addition, 86% said giving the workforce and management access to real-time process safety risk indicators would improve risk awareness and safety. And advanced analytics have the potential to help organizations better understand where to make safety improvements.

The focus on prioritizing work and optimizing maintenance has always been a driver of technology investment, with an overall goal to improve maintenance plan attainment. The low oil price added a new dynamic, in which these systems are viewed as a means to achieve greater operational efficiency and cost-savings. But there is a missing piece to the puzzle—addressing process safety is fundamental to ensuring reliable, profitable operations.

In upstream oil and gas, ensuring resources are used effectively, and with due consideration of risk management, is a question of business survival. Work has to be safe and secure, and all risks managed. This must be factored into any productivity and efficiency calculation. It’s not just a compliance obligation or an insurance policy.

As the 2018 survey suggests, the industry is looking favorably at the technology needed to manage this 3D game of chess. However, digital has yet to deliver a decisive checkmate. There is much work to be done for this positive intent to be turned into action with proven business benefit. Without this, the intended digital makeover of process safety and operational risk will not become a reality—merely an industry pipedream.

METHODOLOGY

The Petrotechnics PSM Survey 2018 was conducted online between May and July 2018. More than 100 individuals took part, including 45 upstream oil and gas industry leaders from around the world, of whom 50% have worked in process safety, asset integrity and operational risk for more than 15 years. In addition, 65% are responsible for managing corporate or regional process safety. The remaining respondents are responsible for single-site or asset process safety.