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Offshore Charging Review Group

Minutes of the meeting held on 4 November 2008

Present

Ian Whewell, HSE, the Chairman

HSE Members

  • Mark Reyland
  • Shaun Welsh
  • Jean Pownall, Secretary
  • Robert Ashdown, BROA

Industry Members

  • Robert Paterson, Oil & Gas UK
  • Bill Murray OCA
  • Alan Macleod, IADC

Introduction

The Chairman welcomed everyone to the meeting. Robert Ashdown, BROA, was attending by telephone conference for Edmund Brookes. Apologies had been received from Jane Bugler, IMCA.

Minutes of the meeting held on 1 November 2007

The minutes had been circulated, agreed and published on the website.

Matters arising

Item1. Paragraph 4. Members were to provide any views on presentation and content of the MTA. Mr Reyland had provided a further breakdown which Mr Paterson thought had gone some way toward additional requirements and he would canvass his members. Other members at the meeting did not think they required any more detail on the MTA but Mr Ashdown would like more on invoicing.

Item 2. Paragraph 29. The Chairman was to contact Steve Walker to reinstate the science and technology working group. This was done and the working group had met.

Item 3. Paragraph 35. Mr Reyland was to write to members seeking nominations for an independent member of the disputes panel. This was done and Mr Reyland had two for this group.

2007/08 Outturn

Mr Reyland said that the analysis showed that the rate required to break even was £157 compared to the £155 charged, therefore HSE had under recovered. There was no retrospective charging, but this outturn influenced the increase for the current year. The 2007/08 rate did not include common good elements in the overhead, thus this was the last time the old style would be used. Mr Reyland provided an additional breakdown, to the lowest level possible, of the GAE elements (£41) and asked if this was what members were looking for. Members agreed it was and had been seeking some clarity. Mr Paterson said they had previously had a table showing budget outturn and the proposed rate. Mr Reyland would look to provide this. The Chairman said this under recovery compensates for the over recovery 2006/07.   
ACTION Mr Reyland.

Proposed Rate for 2009/10

Mr Reyland explained there was a range of extra difficulties in providing an estimate for the new rate, including common good work and science. The proposed rate was provisional and would need to be cleared through Internal Audit (IA) w/c 10 November, to check the methodology and then cleared through SMT before writing out to members at the end of that week. The rate is likely to be at least 10% higher than the current rate. Mr Paterson asked if the IA report would be open and Mr Reyland said there was no problem sharing that report which would include a check of assumptions used.
ACTION Mr Reyland

Mr McLeod said these were turbulent times, at least until 2010, and industry too was facing challenges and asked that the rate be kept as is, recognising science etc. but also that there would likely be fewer rigs. Mr Murray said there was no problem covering the costs but questioned what is industry getting in return. He also endorsed the forward uncertainty and stated that industry were jibbing at increases of 3.3% so would be looking for that level of increase from HSE. Company expansion plans are under severe scrutiny and rumours rife over the future and now is not a time for expanding knowledge (science) but for battening down hatches. The Chairman said that there was a pay review of the specialists, recognising the need for the right level of pay, and an increase in excess of 2% had been pencilled into the calculations until discussions concluded with Treasury. Mr Reyland will set out what prompted the changes, and noted that changes to the number of inspectors would change the size of the pot.
ACTION Mr Reyland.

Mr Paterson had shared The Chairman’s response on common good, including a list of common good work HSE is doing for which costs were not previously recovered. The Chairman was happy to give a commitment to provide examples and any changes to the list on a 6 monthly basis. He was confident that the list was a good representation of work carried out, but noted it wasn’t a full list.
ACTION Mr Whewell

Mr Paterson said he would like to see how changes occur in common good work, starting/drifting etc. The Chairman explained that OSD are not doing as much common good as planned because still running to catch up. They are looking to balance contact –v- boiler house, but must not neglect important front line technical work. Mr Paterson said he wasn’t sure the pay rise had not been accounted for in previous rates. The Chairman said that the Aberdeen allowance had been but we didn’t over recover because of it.

Members expressed their concern at the level of increase. Mr Ashdown said, associated with earlier comments, that 10% was a marked increase. HSE may also want to widen focus e.g. HSE costs far in excess of MCA, can we build theirs into our methodology? The Chairman reminded members that the hourly rate doesn’t only represent the inspector cost and would bring this back in when discussing an alternative scheme later in the meeting.

Science

Dr Welsh talked to the handout (attached as annex 1 – benefits from printing in colour). It shows the full inventory of projects for 2008/09 (£660k) and also that HSE were destined for an under recovery as only £425k had been included in the calculations for the 2008/09 rate. Dr Welsh explained that HSE would continue its challenging approach to the science programme which is limited initially by our share of the science budget. The work firstly had to be needed for frontline staff to carry out their duties, not a ‘nice to know’ basis. Dr Welsh expects further ad hoc science projects but they are likely to be on improvement to data intelligence and an increase in dynamic and structural integrity.

Mr Paterson said he had a very productive meeting with Steve Walker (HSE) a couple of months ago and many of the current projects were historical and he looks forward to directing science in the future. The Chairman asked if another meeting of that group was pending; it is set for autumn 2009, which fits in with budgeting and Health and Safety fora meetings. In summary, 2008/09 science was underestimated by £230k, the Chairman hastened to add that HSE would not be seeking to claw this back. The cost recoverable element for 2009/10 was £200k more than the 08/09 estimate and would add £4 to the hourly rate.

Members asked what procedures are in place to ensure the work is not being done elsewhere e.g. ICRARD, technical topic specialists. Dr Welsh explained that there are procedures which start with the business case. A specific part of the challenge process for any new proposal is to test if a) it’s feasible and b) is there anything HSE can draw on. Mr Murray noted a number of areas fire protection /composites and asked if HSE had any problem with him seeking industry support. Dr Welsh stated that it did not and that we are keen to share the info as we did PFP. HID’s research strategy is on website but we have recently experienced problems getting projects on, so there may be some delay in them appearing on the site. Mr Murray is aware of data on composites that a company held ‘commercial in confidence’, but 2 years down the line they may be willing to share now. The Chairman welcomed that information and would be more than pleased to know if something was out there that we are not aware of. Dr Welsh was happy to be contact for such.

Mr McLeod asked how relevant this research is to his industry. Dr Welsh said there was a range testing the applicability; he doesn’t have the final application but can put Mr McLeod in touch with a topic specialist who can explain applicability.  (Mr Ashdown had to leave due to delayed start of meeting).
ACTION Dr Welsh

Members noted that it looked like lot of work on platforms, but questioned applicability to the MOD U fleet, and if it was possible for HSE to break down the application to each sector so members could get e.g. drilling companies hooked up. The Chairman said it may be possible to identify primary focus group at posting on web stage of a project – and follow up on improving visibility of target group of the project e.g. primary steel replacement.
ACTION Dr Welsh

Alternative cost recovery scheme

The Chairman asked about feedback on the scheme from the main trade associations. Mr Murray had done theirs via Mr Paterson’s group. The general consensus was divided, and thought there was too much complexity attached to the mobile fleet. As far as fixed installations were concerned Oil and Gas thought the proposal was overly complex. The Chairman said HSE needed support to move to a new scheme and also needed referability. The Chairman personally thinks it could have worked but because it is experimental there was a serious HSE business risk because of lack of referability, and invoices may not be paid. He said it was not dead in the water because it still had to go to the Minister & DWP as to why there was no change, so HSE will take that forward.
ACTION Mr Whewell

HSE is still looking at the methodology – current scheme either over/under recovers year on year and mysticism is brought in e.g. hourly rate creates misunderstanding. HSE wonder if there is still something that can be done. The Chairman mentioned a different methodology which could theoretically be introduced next year. Mr Reyland explained the system currently operated by the Nuclear Directorate by which, at year end, HSE make sure there is no over or under recovery. Recoverable costs are invoiced quarterly in arrears. Prior to the start of each financial year, HSE gives industry an indication of the costs to be recovered. A MTA is then produced at the end of the first quarter that apportions recoverable costs based on direct effort in that period. A cumulative MTA at period 2 is produced and an invoice produced, having deducted the amount paid for period 1. These actions are repeated at quarters three and four. HSE still has to predict next year’s effort and inspectors still have to record their time. Mr McLeod asked what was different to now. There is still amount of unpredictability. The Chairman explained the advantages are;

Mr Reyland said an hourly rate could still be calculated using this methodology. Mr McLeod said an hourly rate works better for mobiles. The Chairman said it’s not an hourly rate as such but a notional figure based on hours to do and costs to recover. This system would make it more predictable and transparent. Mr Murray said it would not be good for mobiles. Mr Paterson asked for some practical examples.

The Chairman said that if HSE needs to move resource to different priorities e.g. to fixed installations there would be more hours available if mobiles were stacked. There would be an improvement in the clarity of invoicing. Mr McLeod said he would have to make a value judgement on sight of a proposal. The Chairman said HSE wouldn’t level any charges until the work was done. If the mix of industry changes e.g. stacking, we’d adjust our resource on the basis of that change. HSE can’t reduce staff levels one year and look to reemploy the next. Often planned visits can’t be done because of resource issues. Mr Murray said that HSE’s was the highest cost area in North Sea e.g. Holland, Denmark much cheaper. From a drilling operations point of view we are doing the same job, yet our costs are astronomical in comparison. The Chairman said this was a government decision. Mr Paterson said it would be helpful if HSE could draft something to look at. Mr Reyland said he would check the Nuclear Directorate’s system and draft something for issue to members.
ACTION Mr Reyland

The Chairman explained that he had only discussed as an idea immediately before this meeting and this was a resume of a possible proposal. Mr McLeod said everything under the microscope. The Chairman said it won’t cost more than current system, and current hourly rate not helpful in providing any certainty.

The Chairman thanked everyone for bearing with HSE. If the scheme is not found to be a runner, we may have to come back with other alternatives.

Any other business

Mr Paterson said one member reported noticing 2 inspectors had attended a costly conference. The Chairman said our policy was not to provide speakers unless it was important to us and that we support them sparingly and there should not have been 2 people there from HSE.

Mr Murray will be attending future meetings and not Mr Hey.

Date of next meeting

Secretary to write out with suggested date.
ACTION Mrs Pownall

Offshore cost recoverable science

(i) 08/09

- BUILT INTO COST RECOVERABLE SCIENCE OVERALL £425K

- FORECASTED COST RECOVERABLE SCIENCE OUTTURN OVERALL £656.2K

(ii) 09/10 FORECASTED COST RECOVERABLE SCIENCE OUTTURN OVERALL £633.1K
1) (OD3) PROCESS SAFETY/ INTEGRITY; HUMAN FACTORS
08/09 FORECASTED COST RECOVERABLE SCIENCE OUTTURN OVERALL £414.7 k

(3734) Thermal cycling of PFP for high pressure/high temperature applications (£50.2k)

(3925) Evaluation of Fire Dynamics Simulator (£30K)

(3926) Determination of flammability, fire and explosion hazards from non - process fluids (£50K)

(3929) Formation of Flammable Mists Offshore (£50 K)

(3967) Follow up of issues raised by Ageing Plant report and KP3 - Safety critical elements and safety related systems (£50k)

(3977) Update of relevant ‘internal’ guidance document (SPC 30) - Indicative human vulnerability to the hazardous agents present offshore for application in risk assessment of major accidents (£29.5K)

(4209) Review of OSD inspection and intervention reports to identify common issues and provide a key risk control profile (£30k)

(4011) Dispersion modelling Codes Review FLACS ver.9 (£25K)

(4108) Evaluation of ‘OPEN- FOAM’ models (£15K)

(4215) Developing of models for evaluating damaged passive fire protection (PFP) based on Damaged PFP JIP (2006) (£10K)

(4216) PFP condition/response with explosion followed by fire (£75K)

OD3 : 09/10 FORECASTED COST RECOVERABLE SCIENCE OUTTURN £342.5k

Completing > (4215) Developing of models for evaluating damaged passive fire protection (PFP) based on Damaged PFP JIP (2006) (£20K)

Assess ignition energies for contaminated hydrocarbons (£30k)

Assessment of reduced fire retardance of laundered overalls (£30k)

Developing risk analysis tools for offshore operation (£50k/ yr over 2 years)

Horizon scanning / identification and assessment of emerging issues (£37.5k/ yr over 2 years)

Continuance of EM project (3929): Assess significance of aerosol hazards from multi component flammable impinging releases (£75k/ yr over 2 years)

Trials of testing to the new draft ISO standard for fire dampers. The aim is to continue to encourage, at a minimum cost to HSE, the industry to finalise this new standard and for it to include actual type testing of dampers (£50k)

HSL provision of ongoing routine technical support to operational work (£50k)

2) (OD 4) – STRUCTURAL INTEGRITY ENGINEERING; MATERIALS; AVIATION; DIVING

08/09 FORECASTED COST RECOVERABLE SCIENCE OUTTURN OVERALL £241.5k

(3948) JIP to build a test rig to simulate full scale tests of tension and bending in a mooring chain in a salt water environment (£5.1K)

(3968) Helicopter Safety Research Management Committee: further support to CAA/ industry (£45K)

(3992) Update of accident and incident statistics for fixed and floating offshore installations on the UKCS, data for the years 2006 and 2007 (£7.5K)

(4103) Identify best practice and gaps in knowledge for the structural design, re-assessment and risk assessment of offshore topsides structures responses to fires and explosions (£30K)

(4355) JIP on flexible gas risers (£12.5k)

(TSD 539) How is/should the structural integrity of mobile offshore installations managed to ensure safe operation on the UKCS (£51.4K)

(TSD 537) Assessing structural integrity issues arising from dynamic impacts to offshore installations (£30k)

(4397) Enforcement guidance on composites used offshore (£40k)

(4437) Enforcement guidance on the behaviour of stainless steels (£20k)
09/10 FORECASTED COST RECOVERABLE SCIENCE OUTTURN £290.6k
Completion of (4437) Enforcement guidance on the behaviour of stainless steels (£20k)

Enforcement guidance on aluminium (£40k)

Collate approaches being adopted worldwide to the structural integrity management of ageing structures (£45k)

Evaluate the fatigue performance of welded joints in offshore structures under high cycle/ low stress loading (£50k/ yr over 2 years)

Facilitation of information sharing on offshore petroleum research between ICRARD (International Committee on Regulatory Research and Development) member countries (£10k/ yr – ongoing?)

To review and assess the adequacy of the material property requirements in codes standards and classification society rules for mobile installations (£30k)

Investigate the influence of residual stresses on the structural integrity performance of ageing installations (£45k / yr over 2 years)

Membership of SIMONET (Structural Integrity Monitoring Network) (£600 / yr ongoing)

Provision of external expertise for ongoing technical support to operational issues (£50k / yr ongoing)


Updated 2009-01-05