April 27, 2010
New Idea: Consider Oil Company’s Environment and Safety Record When Leasing Drilling Rights
Posted byPerhaps it’s an idea whose time has come.
Politicians always talk about protecting the environment. Why not do something about it.
Instead of selling drilling leases just based on the amount bid by an oil company, why not also put in a factor that considers the company’s environment and safety record?
Company’s with a poor environment and safety record would have to pay more to get a lease. Thus the cost of poor safety would be much more evident.
Company’s that work hard to maintain a clean record would be rewarded by lower costs for drilling rights.
What do you think? Could it work? Is it an idea whose time has come?
Category: Accidents, Current Events, Performance Improvement
15 Comments »
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By the way, if you like this idea, forward it to your congressman.
Comment by Mark Paradies — April 27, 2010 @ 4:06 am
Mark,
in some countries this kind of clauses have been added but as a punishments and bids. If do you want to have a credibel scorecard you would need at the beginning a history record analysis and audit. Some (all?) companies don’t declare all the environmental accidents …
I believe in this concept / idea but it requires total transparency.
Oscar
Comment by Oscar — April 27, 2010 @ 8:04 am
The method of determining safety record must be created first with an independent evaluation of the records.
In Nuclear we have an independent group in US in INPO which establishes a number of industry standards in Performance Indicators to compare apple and apples. INPO is a self regulation group and independent of Nuclear Reg Commission. WANO is the equivalent to INPO in Nuclear on the international level.
Would the Oil Exploration industry establish and submit to self regulation and reporting of consistent standards?
My opinion, probably not. US has OSHA safety standards but internationally, those standards are inconsistent. How can you hold (and grade) an international company such as British Petrol (BP), to the same standards in the US as say when they are exploring in China, the North Sea, or mid east. What about Chinese company’s drilling off Cuba, a few hundred miles southeast of were the BP spill occurred. How would we hold them accountable?
Too many variables including political.
Comment by Don — May 18, 2010 @ 10:39 am
Drilling contractors do self reporting and auditing to various degrees. This is generally in line with IADC (International Association of Drilling Contractors).
IADC does not enforce any regulations and that is the responsibility of the countrys government.
Comment by Tyler — June 15, 2010 @ 2:29 am
Good idea, but ask the question: will this step have prevented the current issue? Does BP have a history of safety problems?
While this sounds like a good idea, let’s not pick a corrective action that doesn’t actually solve anything and has no chance of preventing the issue in the future.
Comment by JJ — June 15, 2010 @ 9:09 am
Mark,
The oil industry is probably one of the leaders in making a company’s safety and environmental record relevant to future business decisions when working with them. Very sophisticated systems have been put in place to track and score vendors that work in both upstream and downstream petroleum operations (e.g., http://www.isnetworld.com). One of the biggest issues we have as an industry is lack of standardization when it comes to calculation and reporting format in relation to established metrics. A spill to deck/containment/water can be defined and recorded a number of different ways depending on the company. A lost time incident and its associated rate can also be defined and ‘managed’ several different ways. Depending on how a company rates itself, the overall record reported by them is subject to the criticality they place on themselves resulting in an apple to oranges comparison in many instances.
If you want to promote this concept you must first promote the establishment of standardized metrics (KPIs) with auditable variables that are well defined and provide for a reasonable chance of accuracy across the industry.
Comment by Cole Cosgrove — June 15, 2010 @ 9:39 am
Mark:
A good record does not necessarily mean adequately managed risks – it may just mean “lucky so far.” The idea is great, but it must be based on having an effective risk management system that is independently verified by specifically qualified auditors according to a defined management system standard that includes specific administration level requirmeents as well as operation level requirements.
Comment by Wayne MacLeod — June 15, 2010 @ 9:39 am
There are several difficulties with this proposal not the least of which is that most of the drilling in the world today is happening outside of North American territorial waters so a consistant application would be difficult to say the least.
The second is that actual drilling isn’t done by the lease purchaser but by a contact drilling company. This doesn’t mean that a drilling contractor(s) safety record isn’t considered when doing bid evaluations, in fact it’s a significant part of the selection process. The oil company obviously has a lot to say about how the well will be drilled and completed but for day to day operations they rely on the drilling company to do it safe, correctly and in a cost effect way, (in that order).
As always, we need to wait and until the Presidential Commission’s investigation and others underway are completed to help us determine what happened and what needs to be done going forward. This devastating chain of events is far from the industry norm. We all need to understand what occurred on this occasion that did not occur at the 14,000 other deepwater wells that have been successfully drilled around the world.
Comment by Kevin — June 15, 2010 @ 9:46 am
I think that’s part of it. But also think that the oil company should have to submit proof (similar to the nuclear licensing process) that they have:
1- Taken the necessary steps to avoid a disaster like Deep Horizon: (proper installation & maintenance of BOPs and other preventive measures)
2- Planned for a “worst case” event including the necessary procedures equipment and resourses.
Comment by Lee Dobry — June 15, 2010 @ 9:46 am
After 22 plus years in hse in the field, my opinion is;
set a safety bench mark, if you meet it, you drill, if you don’t
you don’t drill! Leave the politicians out of it
and let the hse professionals with ohs set the bench marks.
Comment by Rick Green — June 15, 2010 @ 1:24 pm
Dear Mark:
Company´s with a poor environment and safety records must pay more to get a lease, but this is a part of the solution to avoid these big disasters.
Oil Platforms are no different from anyother big manufacturing plant regarding strict safety procedures.
By the contrary, all the Reliability tools as Root Failure Analysis, Potential risks prevention, Non Destructive Tests, Corrosion Control, Fatigue wear determinations and the best trained people in safety standards must be conducted at the highest level including those at the bottom of the sea.
That´s why I agree with Wayne Maclead ” A good record does not necessarily mean adequately managed risks”………
Comment by SEIDEL MURIEL — June 16, 2010 @ 3:18 pm
As for the idea the the lease holder’s record might not be as important as the driller’s record …
If the lease holder knew they were being judged by performance and their costs varied based on their performance at that well, they would be more likely to pick a safe driller and to listen to their recommendations to keep the drill site safe (no blowouts).
Just a thought …
Comment by Mark Paradies — June 16, 2010 @ 4:05 pm
I don’t agree with penalties for future tenders on past performance, as step changes could be accomplished from learning from mistakes. Rather measure and compete against criteria and performance objectives for rankings as achieved in the Nuclear industry. A more proactive approach that do not allow for “lucky so far to win awards”.
Comment by Francois du Plessis — June 18, 2010 @ 5:30 am
Francois:
Maybe a combination of both?
Mark
Comment by Mark Paradies — June 18, 2010 @ 8:58 am
The leasing is only the beginning of the process. A functional oversight entity would consider past records in the permit for drilling and have discretion to require extra safety technology on a case basis.
The problem is to have a regulatory entity that has enough autonomy to judiously review each permit without interference from “interested parties”.
The “recognized organizations” and “classification societies” that establish an monitor inspection criteria need to ensure there is enough oversight before the regulatory agencies get involved.
There could be enough name changing, flag changing, etc to obfuscate a specific rigs history if that becomes the metric.
Comment by Chris DeMott — June 18, 2010 @ 2:03 pm