Welcome to the seminar.
This afternoon we will be looking at the importance of asset integrity across a whole range of sub-sectors of the energy industry – land based storage and manufacturing operations, offshore exploration and production and transportation.
When I was invited to chair this event I had no hesitation in accepting the invitation and I’m encouraged to see so many of you here to join me.
By comparison with some of the other seminars happening as part of IP Week, this might not be considered the most sexy or glamorous of subjects. Indeed, regrettably, the reality is that this topic would struggle to threaten the agenda of many Boards of companies’ meetings unless we prompt them to do so.
But asset integrity is an important subject, which should engage everyone, including Boards of companies. If there is one thing we should have learned from Flixborough, Bhopal, Piper Alpha, Buncefield, Texas City and some of the other major incidents that this industry has seen over the past 40 years, it is that lack of injuries and near misses is no guide whatsoever that all is well in process safety terms. So, when I hear about the number of businesses who still measure and report – to their Board and stakeholders – safety performance by means of lagging indicators I get very frustrated. Indicators which point to the absence of a problem – so far – say absolutely nothing about what might be about to happen.
In 2004, HSE became increasingly concerned about the general decline in the integrity of fabric, structures, plant and systems of assets in the North Sea offshore oil and gas sector. Our response was a programme of inspections, known as KP3, which ran between 2004 and 2007.
KP3 revealed concerns which fell into 3 basic categories:
In April 2008 HSE hosted a conference in London for all of the major hazards industries which we entitled “Leading from the Top”. We invited chief executives and senior managers from the nuclear industry, from onshore major hazards, offshore, the rail industry and power generation and we had over 200 attendees.
We talked about the need for leadership and about the importance of process safety management. Not only process safety management by the technical experts but a fully integrated process where those at the top understand what it means, pay the subject attention and ask the right questions so that they can be confident that it is being managed at all levels throughout the organisation.
It also made them consider how poorly informed decisions at boardroom level can have unforeseen, catastrophic consequences. The circumstances surrounding the Texas City disaster serving as a case in point.
There, the asset was treated as a classic profit centre with management driving hard towards the target of 10% on investment each year. They were very successful in this ambition with the facility ranking as BP’s best performing out of its 18 US plants and accordingly it received plaudits all round – so on the face of it everything was rosy. The problem was, however, that the capital investment needed to maintain the asset integrity of the refinery operating was also high. One of the routes to achieving 10% ROCE was cutting capital expenditure by deferring projects. This, as we now know, had a dramatic impact on the repair and maintenance programme at the site.
The conference also reinforced the need for us to share our respective experiences. It is crucial that these stories, both of good and bad practice, are told thus ensuring that the lessons are learned more broadly. Because, you are not as unique as you sometimes think you are!
Yes, offshore industry operates in a fiercer and more challenging environment than onshore, but the problems are similar for you all – ageing plant, change of ownership, loss of expertise and corporate memory.
In particular, I look forward to the onshore sector catching up with the offshore industry and taking the initiative to publish information on their performance on process safety management. After all, it was the onshore sector that pioneered the development of process safety KPIs. I know that within the remodelled COMAH regime to be implemented by HSE and our regulatory partners in April. Inspectors will start to assess and record the sector’s performance across a range of key topics and that this information will be used to better target poor performers and laggards.
But there is also some good news. I have been encouraged by the way industry has responded to our interventions in recent years. Encouraged but not yet convinced or reassured that it is fully embedded into the culture of all the organisations where it needs to be and for the long haul – that can only come with time.
Today is another important step on the journey and it is a journey which lasts for as long as the assets continue to operate. Another lesson we all need to learn is the danger of making assumptions about how long assets will be required to operate for and when they will come to end of life. My experience of this capital intensive industry is that assets are almost invariably run for longer than was originally planned. Their processes may well be adapted and modified during their lifetime but lifespan of the assets is frequently extended.
The danger of assuming that a plant or facility has only a few years of operation left is that maintenance work is cut back, investment is curtailed and the assets start to go into physical decline. Retrieving the situation when the lifespan is then unexpectedly extended is a huge challenge and requires several years of catch-up effort.
When I started my career in the chemical industry in 1975 the plant I first worked on was already close to 15 years old. 35 years on I know that plant is still running – despite several rumours of its demise over the years! I don’t think my experience is unique!
Before we hear from the speakers at this seminar, I have one further point I would like to make and that brings me back to where I started. Asset integrity is not simply about securing profitability and operational continuity. This is serious stuff. When we forget the true potential consequences of a major incident in any of the industries represented here to day we tend to lose sight of why it is really so important that we take this subject seriously. “Assets” include the people we employ – they too can be damaged beyond repair.
I want to show you something that can illustrate the point much better than I can…….. (E.ON 3 minute DVD – link to this film will follow in due course).