Steve Harris, Head of HSSE at Vysus Group, shares his insights on the current industry state-of-play and the lessons that can be learnt if the right processes are in place.
The reality of life within the constant ebb and flow of a crude-fuelled boom and bust market is not for the faint-hearted. With a multitude of influencing factors, the landscape within the international oil and gas industry can be aptly described as ‘fluid’ where change is accepted as ‘all-the-time’ and not ‘point-in-time’. That being said, not even the most robust operating models were able to withstand the prefect storm created by a global pandemic combined with the price war of two oil superpowers.
The sheer shock and awe of the impact took everyone by surprise. The wave of change quickly overwhelmed an industry’s business resilience planning that was better suited to a loss of installation than a loss of national infrastructure. Operations within the oil and gas industry immediately began to adjust to the shifting realities but, due to the sheer rate of change, commercial casualties began to quickly emerge.
Those that had survived had been forced to make harsh and decisive decisions to circumvent established decision protocol and immediately slash costs. As a result of this the industry’s resource landscape, and hence operational capability, had changed almost overnight.
As the dust settles, and the industry begins to create a ‘new normal’, there is now a need to count the true cost of those essential business decisions. As green shoots of recovery are beginning to take hold the disconnect between the results of those essential business decisions and what is required to return operations to their pre-pandemic/crash levels, functionality is becoming evident. This has left many internal and external stakeholders (including regulators) asking some very testing and relevant questions. For example:
- How has the impact of the organisational change affected our management of major accident hazards and subsequent compliance with the Offshore Installations (Offshore Safety Directive) (Safety Case etc) Regulations 2015? More specifically, how has the organisational change impacted the management of safety and environmentally critical equipment and do the major accident hazard barriers within the bow-tie models need to be revalidated?
- Have we retained sufficient arrangements to ensure safe operation under the Offshore Installations and Wells (Design and Construction, etc.) Regulations 1996 and/ or the Provision and Use of Work Equipment Regulations 1998? In real terms, what has happened to the maintenance budget and key personnel and will there be a trickle-down effect on inventory and non-productive time?
- Do we still have functional and effective emergency response arrangements which follow the Offshore Installations (Prevention of Fire and Explosion, and Emergency Response) Regulations (PFEER) 1995? Although offshore teams may still be operational, have key members of onshore response teams/ organisations been made redundant and has that changed the dynamic of how to respond to an emergency?
The five-question checklist
These questions give us a stark reminder of Newton's third law. Every action really does have an equal and opposite reaction that, in the case of the oil and gas industry, can easily lead to project failure (and occasionally escalate to tragic circumstances). It appears that now, more than ever, it is critically important that those tasked with leading oil and gas operations can answer five very basic questions:
- Do you have a full understanding of your changed operating model and have you reconciled the capability restrictions with your operational planning?
- Have you quantified your new risk profile and accurately pinpointed areas of operational vulnerability so that the risk can be effectively managed?
- Does latent risk exist in terms of unintended consequences and have you completed sufficient scenario modelling to have confidence in your arrangements?
- Have you stress tested the new operating model to prove that it is fit for purpose and does your value chain have suitable resilience (what about critical suppliers)?
- It is easy to become inward focused, do you have enough of a grasp on the horizon to stay ahead of any forecasted risk and threats to ensure operational continuity?
A four-pronged approach
The common mistake when reacting to a crisis or unfamiliar situation is to over engineer an already uncomfortable circumstance. What Vysus Group has found most effective to cut through the ‘noise’ and roadmap success, is a tried and tested process-driven approach which follows a four-phase plan:
- Taking stock: The foundation of this process is built upon an after-action review that examines the dichotomy of change in terms of the lessons and risks arising from a) the process of existing change (the journey) and b) the opportunities resulting from the outcome of that change. This is generally completed in a SWOT format and invariably captures a variety of valuable lessons that would otherwise have passed by unnoticed. The lessons from the SWOT are then fed back into the organisation’s management system to bolster future business continuity planning. This stage is also key in identifying the state or phase of change (and to what degree it continues).
- Mapping and scenario assessment: Each and every mapping exercise should be tailored to the organisation or operation under review. This process can generally be broken down into ten characteristics: strategy, structure, process, people, systems, facilities, knowledge, intellectual property, equipment and technology. This involves a comparative analysis between the old and new operating models (pre and post change) which is then overlaid by a number of planned and reasonably foreseeable scenarios that could range from drilling programmes to decommissioning activities. Included within this process are also less recognised, but no less critical, aspects such as knowledge management (the integration of learning/ best practise/ legislative changes) as well as contingency capability.
- Risk assessment: The outcome of the mapping and scenario assessment is then used as the basis for a risk assessment. This involves compartmentalising the current and planned work into logical stages and then identifying the existing and emerging risks associated with each. Those same stages are then subjected to an enabling calculation against the new operating model which reveals a risk forecast which is used to detail the most effective organisation of resources at each stage. This critical management tool not only facilitates risk control but is able to positively leverage risk in many circumstances.
- Implementation plan: A stage-gate plan will then be created from the risk assessment process that will align strategy (local and company-wide) with execution. The plan will contain a defined timeline overlaid with operational requirements and capability that will include a limited number of proactive and reactive key performance indicators within a balanced score card. This will also include a roll-out schedule to engage the workforce and a number of after-action reviews (AAR) to prevent project ‘mission creep’. Within this step the predicted operational activity is also matched against any reasonably foreseeable emerging external threats (by use of a PESTLE analysis) to provide assurance that the model is also capable of withstanding the next industry influencing event.
Benefits and Consequences
The global recession triggered by the financial crisis of 2007 is arguably the most significant pre-COVID period of volatility in recent history. It was found that by 2009 the earnings of resilient companies had risen by 10%, while industry peers had lost nearly 15%. There is a growing feeling that the same disparity will become apparent within the oil and gas industry in the coming months.
Quite simply, to stay commercially relevant an organisation must engineer its resilience management to ensure continued relevance within the marketplace. With only 1 in 3 transformation efforts recognised as a success, the need for a trusted business partner in this sphere can be viewed as a prudent investment. Even more so when it is considered that companies with established change management practices are 3.5 times more likely to outperform peer organisations.
Evolution not revolution
While Benjamin Franklin may have said only death and taxes are certain in this life, many within the oil and gas industry would add ‘change’ to that list. The latest change brought about by a monumental COVID-19/ price crash shift and market readjustment that will offer opportunity for some and adversity for others.
By following this four-stage process, combined with employing the experience and expertise of specialists in this area, any business can leverage this change to their advantage. This means taking stock, mapping reality, assessing the risks and implementing a sound plan of execution. This process will enable progress to be monitored, measured and demonstrated to all stakeholders and, with planned change management spending found to historically return a factor of between 2-6.5, the evidence would suggest it makes for a wise investment.