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Remembering incidents, rethinking safety

07th November 2013

GL Noble Denton’s executive vice president for the Americas, Arthur Stoddart talks exclusively to Oil & Gas Technology about the evolution of regulation in the UK 25 years after Piper Alpha, changes to the US regulatory framework following Macondo and how experience drawn from major offshore accidents may lead to a more risk-free industry

Remembering incidents, rethinking safety
Fire boat response crews battle the blazing remnants of the offshore oil rig Deepwater Horizon, April 21, 2010. Image courtesy of US Coast Guard

OGT: What impact did Piper Alpha have on the industry at the time of its occurrence?

 

Arthur Stoddart: I remember it very very well. It was, and still is, pretty much the biggest disaster that has happened in the North Sea. Nobody could have conceived that you could have an explosion and a fire so big that it would completely wipe out a big platform – it was just beyond people’s comprehension at the time. Thankfully, since then, we have not had anything even remotely close to that in terms of the scale, the loss of life and the impact on the industry.

 

OGT: How has regulation evolved in the UK following Piper Alpha and in the US post-Macondo?

 

AS: In the UK, Piper Alpha stopped the industry in its tracks. There was a significant pause in development and a big reduction in output. A lot of operators shut in and completely rethought their approach to safety. There were massive changes to the way the industry was regulated, to the design and operation of offshore installations, but also to our very mindset in terms of the importance of managing fire and blast and hydrocarbon releases, all of which enhanced safety culture and performance.

In the US, the changes have been kind of similar. The Minerals Management Service (MMS) of the US Department of the Interior and lead regulator at the time of the Macondo blowout was split into two to provide clear responsibility for clear rules that have to be managed.

The same lessons were learned in the UK 25 years ago. You’ve got to separate the two goals and assign them to two separate entities as potentially there may be a conflict of interests there. But the US has needed to suffer its own disaster and trauma to come to the same conclusion.

 

OGT: Do you believe that US operators have a positive attitude despite the tough changes which have been enacted?

 

AS: Earlier this year, GL Noble Denton researched more than 100 senior oil and gas professionals based in the US to gauge their attitudes towards the regulatory changes that are coming into effect following the Macondo disaster.Our research indicates that, while many expect the regulatory regime to get tougher over the next few years, the majority of people believe that the changes will improve safety and reduce the industry’s impact on the environment.

The government is asking operators to subscribe to a number of new standards and regulations and of course this is going to cost them money. But operators realise that this is beneficial to them as well, it’s not just extra cost. It will improve safety and reduce the risk of a major environmental disaster.

 

OGT: How do oil and gas professionals expect the new regime to increase safety?

 

AS: Things go wrong now because we’re doing new things. If we’re developing carbon copies of fields – same production, same facilities – then once you’ve learned the lesson you know what works, it’s tried and tested and you can codify the way to make everything safe.

But when you’re doing something new you suddenly put yourself into an area where there’s no experience. How do you ensure that what you’re going to be doing is safe? You can’t just look up the regulation because effectively nobody’s done this before or the circumstances may be slightly different. So you need to have a more systematic approach to how you make the thing safe from the bottom-up rather than just following what was successful before.

 

OGT: Is there a strong desire for a goal-based regulatory framework?

 

AS: There is a very big appetite in the US for a goal-based approach to regulation. That is a big change in a traditionally prescriptive-oriented industry, an approach which proved very successful in the US for many years.

For me, this means that people realise now that big offshore developments are massive and much more complex, in very deep waters, in high temperature and high pressure environments. They are not the standard shallow water jackets that have been the stable base of Gulf of Mexico for a long time.

Today, you can’t just put down a prescriptive set of rules, tick the boxes, comply with all regulations and be absolutely sure that you will be alright. Current offshore developments are considerably more demanding and require a much more systematic approach to assessing what’s the right way to achieve the goal – which is protect people and prevent spills. But it takes time for regulators and mindsets to change.

 

OGT: Do you feel that there is the potential for a rise in M&A activity as a result of tightening regulations?

 

AS: There is a perception that the costs of compliance and potential liabilities associated with offshore developments are now a lot higher. As a result, people do feel that M&A activity will increase because to take those kinds of risks you need to be a big company with deep pockets, and therefore it will be harder for smaller operators to tackle the kind of projects that they want to tackle. More regulations and more controls usually favour big companies.

 

OGT: Has the aftermath of Macondo had a negative impact on future US investment opportunities?

 

AS: The input that we’re getting is that clearly the regime is going to get tougher, but that will not have a negative impact on investment. In January, we surveyed more than 400 oil and gas professionals on which they felt would be the leading oil and gas destinations for 2013, and the US came up first, which makes sense. Spending is increasing here and the level of production has never been higher.

A lot of the investment now is going onshore to exploit huge shale gas, shale oil and unconventional resources. Exporting that gas overseas will really drive up investment. You may not have to worry about low gas prices domestically since you will be selling it to other countries. I think there will be more terminals getting LNG export approvals in the near future.

 

OGT: Do you believe that the industry now possesses the adequate regulation to prevent a repeat of an incident such as the Macondo Deepwater Horizon disaster?

 

AS: There’s been a lot of careful assessment and analysis of exactly what went wrong with the drilling operation. There are now stronger requirements for verifying and checking all the activities related to drilling a well. They have been put in place and as long as companies comply it’s very unlikely that the exact same thing will ever happen again.

 

OGT: Would you agree that companies that have had to reassess their safety management strategy and rethink the way they operate offshore gives them a competitive advantage as they look to invest in plays in Brazil, Russia, India and China?

 

 

AS: Absolutely. Some companies actually have that approach, as they’ve had to learn from industry incidents, implement new systems and adapt accordingly. Governments in those countries do not want to have any disasters at all. If a drilling company comes to them and shows that they have learned from major accidents and that they’ve implemented new standards, those governments will favour them because of their experience. This will of course improve safety across their areas of offshore exploration. From that perspective, offshore accidents may have a positive trickle-down effect upon the entire industry.