Beyond Compliance: Reducing Major Incidents, Creating Business Value

September 2015, Vol. 242, No. 9

Katherine Molly, Principal, and Josh Arceneaux, Expert Practitioner, North Highland

In the five years since the Deepwater Horizon spill in the Gulf of Mexico, operators have undergone progressively tighter regulatory restrictions in both offshore and onshore environments.

Along with restructuring the Department of the Interior to include the Bureau of Safety and Environmental Enforcement (BSEE) and the Bureau of Ocean Energy Management (BOEM), more than seventeen reforms have been implemented since the 2010 accident, targeting everything from well-design to maintenance reviews to safety culture.

Navigating these developments requires the effective use of a safety management system to maintain compliance and reduce risk. However, as the drop in the price of oil places further pressure on fiscal operations, pipeline safety management systems must evolve to create value for the business, beyond a sole focus on compliance.

Best Practices

In response to pressure for safer pipeline systems from the National Transportation and Safety Board (NTSB), the Pipeline and Hazardous Material Safety Administration (PHMSA), American Petroleum Institute (API), along with industry leaders, together, will soon publish Pipeline Safety Management System (PSMS) Requirements Through API RP 1173.

Similar to the BSEE Safety and Environmental Management System (SEMS) II requirements, the goal is to reduce both personal and operational incidents based on industry best practices. The areas of concern include leadership accountability, change management, incident management, continuous improvement, effective information sharing and contractor/vendor management.

In many cases, operators are conditioned to meeting regulatory compliance and adherence to best practices as defined by the requirements and elements within SEMS II, API RP 1173, OSHA PSM CFR 1910, and other regulatory statutes.

Successful organizations that meet the higher expectation of reducing major releases and incidents while simultaneously improving business performance have key characteristics, such as the ability to cultivate a system think culture, align management system components with business functionality and measure leadership accountability for achieving yearly safety and business goals/objectives.

System-Think Culture

System-thinking is a way of viewing an organization as a whole – commercial, engineering, procurement, environmental health and safety (EH&S), operations/maintenance, human resources – to understand how one area affects others.

In essence, it focuses on providing capable people with quality information to make better and safer decisions. Typical system-think organizations focus on holistic view points and approaches to openly understand vulnerabilities and solve problems.

Organizations with a system-think culture routinely evaluate what is needed to reach performance targets. These organizations provide evidence of high-value performance and generate transferable lessons for continuous improvement. This supports reducing offshore pipeline construction and operational risk, improving safety and reliability, and delivering maximum value to stakeholders.

Alignment to Business Functions

Aligning management systems with business functions requires a shift in thinking from demonstrating compliance as the primary driver to reducing overall risk of operations and adding value to the business. As opposed to building a compliance system to the regulatory components, the requirements are ingrained within the business functions.

For example, the Interior Department’s recently released well-control rule requires outside audits of equipment, requires that each blowout preventer have a back-up pipe-cutting shear and mandates real-time monitoring onshore for wells offshore. These rules will require changes in how business functions operate within and with each other.

These requirements should be embedded in the existing engineering and design processes to become standard practice as opposed to a specification only referred to as an external EH&S requirement.

This shift supports a holistic understanding of business functions and dependencies involved with acquiring oil and gas product from the point of production or storage, transporting these products through the pipeline assets and delivering the products to the customer.

This alignment and understanding is magnified for offshore operations where the consequences of incidents increase significantly compared to onshore activities. Alignment provides for a better use of the safety management system to reduce overall risk and add value, which includes:

• Preventing major incidents by enabling cross-functional information exchange and communication to create understanding of how areas affect each other

• Improving governance and accountability across the organization

• Providing a more direct and measurable approach to improving operational excellence

• Creating a capability for real-time or nearly real–time reporting and analysis of cross-functional dependencies

• Reducing costs, increasing transparency and improving quality of outcomes by increasing standardization across geographical, organizational, and functional silos.

Measuring Leadership Accountability

Effective business transformations and safe cultures require leadership accountability from top executives down to field level management. But it begins at the top and must be demonstrated and communicated across the organization.

Top management must establish and maintain policies, goals and objectives of the program following the API recommended practice. Next, leaders at all levels of the organization must commit to making informed decisions and taking actions consistent with safety management system guidelines. One way to share commitment is for all leaders and employees to sign a “safety pledge” that outlines the organization’s safety vision and culture.

It’s only when leaders collaborate and work with front-line employees that a program will be successful. This allows for the effective delegation of authority clearly communicated expectations before each job. By sharing leadership for the safety management process, teams and individuals from the board room to the drilling deck feel supported, ensuring implementation of the safety process. A true safety culture then emerges with the mechanisms in place for continuous improvement to achieve measurable positive results.

Effectively measuring leadership’s progress toward API RP 1173 guidelines will help promote alignment across the organization and speed adoption.

Business of Safety

A culture of trust and shared values can produce numerous benefits, including improved achievement of commercial targets, improved asset life-cycle costs, along with cost-savings due to less safety incidents, downtime and unplanned maintenance.

A well-implemented pipeline safety management system that incorporates best practices of a system-think culture, alignment to business functions and accountability from the top to the bottom will yield business value beyond those of compliance and reduced risk. Safety is about more than just people and the environment; safety is also just good business.

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