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RISK MANAGEMENT & WELLBEING
By Tsvetana Paraskova
The pandemic put
RISK MANAGEMENT in Oil & Gas to the test
Exploration and production (E&P) companies reassessed their investment plans and re-phased projects and planned capital expenditure. Drilling activity was severely hit by the pandemic as many companies chose in the initial aftermath of the COVID-19 pandemic in the spring to defer activity, in order to minimise operational risk and uncertainty over the supply of critical equipment. As a result, OGUK anticipated in the spring that there could be a 20–30% reduction in revenues across the supply chain along with similar levels of decline in earnings before interest, tax, depreciation and amortisation (EBITDA) margins. Total expenditure in the UKCS is expected to drop by around 30% this year as companies reduced activity levels, OGUK said in its Autumn Snapshot of the Business Outlook 2020.
Risk management has always been one of the most important aspects of management of energy infrastructure and oil and gas installations.
“It could take two to three years to restart much of the capital investments that have been lost. This is reflected in the low business sentiment expressed by OGUK members as companies look to 2021,” OGUK said.
Managing Health & Safety Risks While the UK offshore industry was grappling with disrupted and/or delayed activity due to the pandemic, it also had to ensure the health and safety of workers.
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ompanies and service and equipment providers manage a wide range of potential risks—from the health and safety of workers in harsh environments to the security of energy supply and smooth running of operations. Firms have process and equipment safety protocols to ensure asset integrity and quick and efficient response to potential failures in systems. In addition, the energy industry has to assess risks to financial performance and plans of capital expenditure stemming from the volatility in oil and gas prices. In 2020, the robustness and readiness of the risk management procedures were put to the test by the black swan event, the COVID-19 pandemic, which upended company plans for spending and operations this year and forced firms to adapt to changing rotation schedules on offshore platforms to ensure maximum possible protection of workers from the coronavirus. The companies adapted—they recalibrated investment plans, delayed drilling campaigns, and implemented additional safety protocols and procedures to protect personnel while ensuring the essential supply of energy in the form of oil, gas, or renewable energy.
“Working tirelessly with governments, regulators and our industry we have secured clear arrangements on the safe removal of suspected cases from offshore, on establishing our workforce as key workers so they can continue to send their children to school if they have to and to continue to travel to work and on temperature testing as standard at all heliports,” OGUK Chief Executive Deirdre Michie and Step Change in Safety Executive Director Steve Rae said in a joint statement in March.
"Total expenditure in the UKCS is expected to drop by around 30% this year..."
Managing Price Risks Energy firms across the world, including those operating in the UK North Sea, grappled with a plunge in oil demand and oil and gas prices. “Lower prices will affect the revenues of all companies, further stretch balance sheets and impact investment rates,” the leading UK offshore industry body, OGUK said in its Business Outlook 2020 in the spring. The impact was felt by supply chain companies almost immediately as the lower-than-anticipated levels of activity started to take effect. Many companies in the supply chain already had limited scope to absorb further cost reductions, OGUK said.
www.ogv.energy I December 2020
As early as in March, OGUK teamed up with Step Change in Safety, the industry’s recognised safety organisation, to offer support to the tens of thousands of workers keeping the UK running with secure and affordable energy during the pandemic. The organisations created an online hub with guidance, videos, and FAQs to address concerns on the prevention and protection against coronavirus in around 150 manned installations across the UKCS as well as the onshore workforce.
When the UK went into lockdown in March, the number of workers on offshore oil and gas installations decreased by around 4,000, official figures from OGUK showed in early November. Average weekly personnel on board decreased from around 11,000 on the 8th of March to just over 7,000 a month later, with drilling and engineering construction segments hardest hit.
Since the lowest point in April, there has been some recovery in personnel on board (POB) numbers, but they remain below the pre-lockdown level. OGUK believes that the testing of all offshore workers for COVID-19, and not just those presenting with symptoms, will be key to enabling more workers to return, the industry body said in its Workforce Insight 2020 report.
“Our figures confirm the initial operational impact of the lockdown back in March this year, with the number of workers offshore decreasing considerably in the space of a month as companies reduced to minimum manning in a bid to control the spread,” report author, OGUK workforce engagement and skills manager Dr Alix Thom said, commenting on the report.
“Numbers have risen steadily since then as industry has adopted a robust Swiss cheese barrier model, with a range of preventative measures in place both prior to mobilisation and whilst offshore, which has helped secure more jobs and increase operations in the immediate term,” Thom said.
