Key Programme 3 - Asset Integrity A review of industry’s progress

A report by the Offshore Division of HSE’s Hazardous Installations Directorate

July 2009

Contents

Executive summary 3 Synopsis 3 Key findings 3

Background 5 The offshore oil and gas industry 5 The Health and Safety Executive (HSE) 5 Key Programme 3 – Asset Integrity 5

The KP3 report 6

The purpose and methodology of the 2009 KP3 Review 7 KP3 Review: Workstream 1 - Asset integrity 8 KP3 Review: Workstream 2 - Workforce involvement and safety culture 9

Industry progress on the KP3 findings 10 Asset integrity/process safety management systems 10 Physical state of plant 11 Safety-critical systems 12 Underlying issues – leadership 14 Underlying issues – the engineering function 15 Underlying issues – corporate and cross-industry learning and communication 16 Human resources and competence 17

Offshore workforce involvement 18 Safety culture 18 Workforce involvement in controlling major accident hazards 19 Existing mechanisms for workforce involvement 20

Conclusions and forward look 21

Annexes 1 Case studies 23 2 OSD corrosion management and verification projects 28 3 Hydrocarbon release data 31 4 Asset Integrity: An industry progress report (Oil & Gas UK) 33 5 KP3 Review project report on workforce involvement (OIAC’s Workforce Involvement Group) 53

Further reading 95

Further information 96

Figures Figure 1 Management system elements 2007 and 2009 10 Figure 2 Physical state of plant 2007 and 2009 12 Figure 3 TR HVAC dampers 2007 and 2009 13 Figure 4 TR doors 2007 and 2009 13 Figure 5 Deluge systems 2007 and 2009 13

Executive summary Synopsis

In November 2007 the Offshore Division of the Health and Safety Executive (HSE) published a report of its three-year inspection initiative known as Key Programme 3 (KP3). This was a comprehensive appraisal of asset integrity management of offshore installations on the United Kingdom Continental Shelf, and revealed significant issues regarding the maintenance of safety-critical systems used in major accident hazard control in the industry. Although raising significant concerns as well as setting challenges, the KP3 report was accepted as valid by the UK offshore oil and gas industry.

At a Parliamentary debate on 2 July 2008 to mark the 20th anniversary of the Piper Alpha disaster, the Secretary of State for Work and Pensions commissioned HSE to review the progress made by the UK offshore oil and gas industry in addressing the issues identified by the KP3 work.

HSE’s Offshore Division undertook the review, with input and co-operation from key industry stakeholders, including trade unions and industry trade associations. This report presents the results of the review and includes Asset Integrity: An industry progress report from Oil & Gas UK (see Annex 4), and KP3 Review project report on workforce involvement from the Offshore Industry Advisory Committee’s Workforce Involvement Group (see Annex 5).

Overall, the review found that the industry had allocated considerable resource and effort to improve offshore assets and compliance with relevant standards, and that the offshore industry leadership has responded well. There was evidence of good progress in addressing the issues identified by the KP3 work. However, the review also found that the work is by no means complete and continued effort is necessary to sustain the momentum of improvement initiatives, so that facilities are not allowed to degrade to the extent identified in the 2007 KP3 report.

The review highlights that offshore safety and the security of UK energy supply depend on successful management of oil and gas asset integrity. It is therefore essential that fluctuating economic environments should not slow progress on management approaches to achieve and sustain the improvements KP3 emphasised as necessary.

Key findings

Asset integrity/process safety management The review found evidence of considerably raised awareness of the need for effective process safety management and major hazard risk controls. It is clear, however, that further progress in the management of asset integrity is required. The industry must also focus effort on greater reduction of significant hydrocarbon releases to build upon progress already made.

Physical state of plant The review noted good progress on fabric and general plant maintenance, but ageing infrastructure and logistical issues make it likely that this will remain an ongoing challenge for the industry.

Safety-critical systems There was strong evidence that remedial work has taken place to rectify matters giving cause for significant concern identified in the original KP3 report, with all the original ‘red traffic lights’ closed satisfactorily. However, this is a dynamic situation and there is

evidence that in some areas more effort by the industry is required to ensure that such improvements to safety-critical systems are sustained in the long term.

Leadership The review found that leadership is now firmly on the industry’s agenda and a number of high-profile initiatives have been undertaken. There was strong evidence that the role of leadership in integrity management has been effectively promoted through the industry. The industry has also developed its use of key performance indicators (KPIs) for asset integrity, which should improve the quality of information available to senior managers. It will be important that these improvements to the leadership function are preserved as senior managers change over time.

The engineering function The review noted a strengthening of the technical authority function in a number of companies. Offshore personnel provided positive feedback on the benefits obtained. To ensure sustained positive benefit, the industry needs to adopt the enhancements to the technical authorities’ role uniformly across the sector.

Corporate and cross-industry learning and communication There was evidence that the culture in the industry is changing, with more open sharing taking place between organisations. However, the review considered that more effort is required by the industry to break down barriers which are preventing more effective integration of the work of their independent verification bodies, and also noted that concerns still exist over effective auditing and knowledge sharing within companies.

Human resources and competence The review found that the issues centred around human resources and competence were currently less acute. This is partly due to labour market changes arising from the global downturn. The offshore industry has also made progress in addressing competence issues and has devoted significant resources to training and major hazard awareness. Some issues remain concerning the loss of experienced staff and associated corporate knowledge, particularly in major hazard risk management. It will be important that industry continues to focus on recruiting and retaining a fully competent workforce at all times.

Safety culture The review found that progress has been made in key areas, which may produce a positive impact on safety culture offshore. This includes recent industry guidance on ‘not required back’ (NRB) policies and enhancing leadership knowledge and understanding. The NRB issue will remain a concern until the industry guidance becomes widely embedded and secures workforce confidence, contributing to improved safety culture.

Workforce involvement in controlling major accident hazards The review found that major hazard risk controls and the role of installation integrity are now better understood by the offshore workforce. Maintaining this high level of awareness will be critical to future success. However, further work is necessary to achieve the aim of the requirements set by regulations for effective consultation of safety representatives on installation safety cases.

Existing mechanisms for workforce involvement Safety representatives and safety committees have a continuing key role in health and safety management offshore. However, there are continuing questions about the effectiveness of both, and the extent to which some companies meet the requirements of the Regulations and make best use of this valuable resource.

The workforce has a high degree of awareness, but the extent to which workforce involvement and elected safety representatives are effective in securing improvements is generally not measured or assessed by companies. Though challenging to measure, this opportunity for improvement should be considered to support attainment of greater safety management benefits from workforce involvement.

Background The offshore oil and gas industry

1 This industry employs over 25 000 people in a range of activities working offshore on over 300 installations. Although there have been improvements in health and safety offshore since the Piper Alpha disaster in 1988, the major hazards are ever present – fire, explosion, release of gas and structural failure. All of these have the potential to cause major loss of life. Specific legislation exists to deal with the hazards arising from the operation of fixed and mobile installations, wells and pipelines. This is supported by relevant legislation linked to generic industrial hazards.

2 This is a dynamic and rapidly changing industry but one with an ageing infrastructure and increasing cost pressures as the available oil and gas declines. These issues, together with the geographically isolated workforce and the inherent hazards in working offshore, require high standards of management of health and safety.

The Health and Safety Executive (HSE)

3 HSE’s mission is to ensure that risks to people’s health and safety from work activities are properly controlled. To achieve this for the offshore oil and gas industry HSE uses the expertise, knowledge and skills of staff in its Offshore Division (OSD), who are a part of the Hazardous Installations Directorate.

4 OSD’s continuing goals for the offshore oil and gas industry are:

■■ to prevent major accidents with catastrophic consequences; ■■ to secure a Step Change improvement in injury rates and work-related ill health and consequent days lost from work; ■■ to support industry’s goal to be the world’s safest offshore sector; ■■ to secure more effective workforce involvement; and ■■ to maintain an effective regulatory framework.

Key Programme 3 – Asset Integrity

5 In 2004 HSE’s Offshore Division started Key Programme 3 (KP3). This was a resource-intensive initiative involving nearly 100 co-ordinated, targeted inspections over three years. Its objective was to ensure that offshore dutyholders adequately maintained safety-critical elements (SCEs) of their installations. SCEs are those parts of an installation and its plant that exist to prevent, control or mitigate major accident hazards; the failure of which could cause or contribute substantially to a major accident.

6 A report of the findings of the KP3 programme was published in November 2007 (see Further reading). Although raising significant concerns as well as setting challenges, the report was constructively received and accepted by the UK offshore oil and gas industry.

7 KP3 raised the profile of asset integrity management and associated underpinning issues such as workforce involvement and leadership. The report underlined the importance of an engaged, trained, competent, informed and involved workforce in the effective management of a major hazard work environment.

8 At a Parliamentary debate called by Frank Doran MP on 2 July 2008 to mark the 20th anniversary of the Piper Alpha disaster, the Government announced that the Secretary of State for Work and Pensions had asked HSE to formally review progress made by the UK offshore oil and gas industry in tackling issues identified in the KP3 report. During the debate, Parliamentary Under-Secretary of State for Work and Pensions Mrs Anne McGuire stated:

‘I am pleased to advise my Honourable Friend the Member for Aberdeen North, and other Honourable Members, that the Secretary of State has commissioned the HSE to review the industry’s progress on the issues identified by the KP3 programme. The issues include focusing on industry leadership to create a stronger safety culture in which the involvement of the workforce, including the industry’s trade unions, will be critical.’ Hansard July 2008

The KP3 report 9 The KP3 report defined asset integrity as ‘…the ability of an asset to perform its required functions effectively and efficiently whilst protecting health, safety and the environment’. Asset integrity management is the means of ensuring that the people, systems, processes and resources that deliver integrity are in place, in use, and will perform as required over the whole lifecycle of the asset.

10 The KP3 Programme involved targeted inspections of nearly 100 offshore installations representing about 40% of the total on the UK Continental Shelf. These included: fixed installations; attended and normally unattended installations; floating production installations; floating production storage and offloading vessels; and mobile drilling rigs. It involved all of OSD’s Specialist and Inspection Management Team inspectors and all levels of management.

11 Inspection findings were recorded using bespoke standardised templates. Topics were scored using an extended traffic light system: Red (Non-compliance/ Major failing); Amber (Isolated failure/Incomplete system); Green (In compliance); or White (Not examined). Multi-disciplinary teams of inspectors determined the traffic lights from the evidence collected.

12 HSE took appropriate action in line with its enforcement policy when a red traffic light was recorded because this indicated a major failing of a system.

13 Essential for the integrity of any installation are the safety-critical elements (SCEs). KP3 focused primarily on the maintenance management of SCEs, ie the management systems and processes that should ensure SCEs would be functioning effectively when required.

14 The areas in which the 2007 KP3 report raised important issues included:

■■ asset integrity/process safety management systems; ■■ physical state of the plant; ■■ matters of significant concern with major hazard risk control measures;

■■ human resources and competence; ■■ underlying issues; –– leadership; –– the engineering function; –– corporate and cross-industry learning and communication.

15 Maintaining asset integrity is a continuous process through the lifespan of the asset. All systems degrade with time, and management systems are no exception to this. Continuous monitoring and review are required to ensure that management systems remain fit for purpose. Similarly, changes will inevitably occur over time in personnel, corporate structures, and ownership of assets. These changes will impact on organisations’ ability to maintain asset integrity to required levels.

16 Speaking at the launch of the KP3 report on 21 November 2007, the then Chair of HSC Judith Hackitt (now Chair of HSE), said:

‘In the light of the findings from the KP3 report, asset integrity will continue to be one of the main priorities for HSE’s Offshore Division in 2008 and for the foreseeable future, but it must also be clear that it is for the industry itself to show leadership and face up to its responsibility.’

Ian Whewell, Head of HSE’s Offshore Division, added:

‘The advantages of better safety in the sector are obvious. However, ensuring the offshore infrastructure is well maintained also makes good business sense as it’s not just the industry that benefits – the whole economy benefits and it will help ensure that there is a long-term sustainable future for the offshore industry.’

17 The KP3 approach for the control of asset integrity issues has been accepted without challenge by the UK offshore oil and gas industry, which has shown clear commitment to address the shortcomings identified in the report.

18 The outcomes from the KP3 programme also influenced the formulation of OSD’s subsequent plan of work, helping to set priorities for the Division from 2007 onwards. Part of OSD’s response to the issues raised by KP3 was the establishment of further project work to follow up specific KP3 themes.

The purpose and methodology of the 2009 KP3 Review 19 The purpose of the review was to measure the progress of the UK offshore oil and gas industry against the findings highlighted in November 2007. This review was a significant activity for HSE, although it did not seek to repeat the original scope and duration of KP3. Accordingly, OSD diverted appropriate resources to ensure a thorough and balanced approach, and to identify the work undertaken by industry and HSE since the original KP3 work finished. The review team contained personnel involved with the original KP3 work to ensure a continuity and focus.

20 The review was undertaken in two separate but linked streams of work. The first concentrated on progress with respect to the asset integrity of offshore installations and their safety-critical elements. The second stream of work focused on the involvement of the offshore workforce and improvements made in the creation of a stronger safety culture within the industry.

KP3 Review: Workstream 1 – Asset integrity

21 The methodology employed for this part of the review began with an initial scoping exercise with assessment of the information contained in the KP3 report. OSD then invited submissions from various industry stakeholders to specify the progress they had made on the findings. These industry groups included:

■■ trade associations – representing the full range of companies involved in the UK offshore oil and gas industry, including oil and gas operating companies, exploration drilling companies and contracting companies involved across the sector; and ■■ trade union organisations – involved in representing the views and interests of offshore workers.

A key composite submission received was Oil & Gas UK’s Asset Integrity: An industry progress report, which can be found in Annex 4 and at www.oilandgasuk.co.uk/ issues/health/kp3.pdf.

22 OSD also undertook a significant package of work with its own resources to provide additional, independent evidence of the industry’s progress, and thus obtain an element of triangulation in the review.

23 The review team completed a series of independent case study sample inspections offshore, to validate industry’s reported progress and the information available from internal OSD sources (primarily inspectors’ reports). These case studies (see Annex 1) used the same approach taken during the original KP3, and the same ‘traffic light’ reporting template. It was therefore possible to make a direct comparison between the changed status, on the installations selected, of KP3 elements since the original programme inspections and this review.

24 The review also included specific checks to determine industry progress on the status of maintenance and SCE issues, which were considered ‘red’ according to the traffic light format used in the programme, originally reported in 2007 on 26 installations. The work required OSD inspectors to examine the original KP3 programme findings relating to these ‘red’ issues for each installation originally inspected. The review also looked at the progress on all of the matters that the original KP3 programme identified as requiring follow-up action, whether by letter or through more formal enforcement.

25 The review team cross-checked the progress reported by industry stakeholders against data held by OSD inspectors who deal with individual installations and dutyholders. The review also used information