ISO 55000 will up the ante for offshore asset performance management

Considering the asset-intensive nature of fixed and floating offshore platforms and subsea production systems, the need to manage these asset effectively for HSE risk management and productivity reasons, and pending compliance issues, it would be very surprising to learn that asset management professionals in the offshore oil and gas industry are not familiar with asset management standards such as the upcoming ISO 55000 asset management systems standard.

Paula Hollywood
Tim Shea
ARC Advisory Group

Considering the asset-intensive nature of fixed and floating offshore platforms and subsea production systems, the need to manage these asset effectively for HSE risk management and productivity reasons, and pending compliance issues, it would be very surprising to learn that asset management professionals in the offshore oil and gas industry are not familiar with asset management standards such as the upcoming ISO 55000 asset management systems standard.

According to the International Organization for Standardization (ISO), the current status of the standard is nearing completion, with the final ballot expected between October and November 2013 and publication in early 2014. How will this impact the upstream oil and gas industries? While ARC Advisory Group does not anticipate immediate impact, it does encourage E&P (and other) companies to prepare for the trickle-down effect expected from regulatory bodies and insurance providers as a result of a formal international standard for managing assets.

Originally developed by the UK-based Institute of Asset Management and published by the British Standards Institution (BSI), Publicly Available Standard (PAS) 55 was launched in 2004 as a general standard for managing physical assets. The initial targeted industries were those serving the public, primarily regulated infrastructure and public utilities. The structure of the standard is analogous to Deming's Plan-Do-Check-Act continuous improvement cycle used in quality management systems. PAS 55 certification requires an enterprise to optimally manage capital investments, daily operations, maintenance, resources, risks, performance, and sustainability for all its assets. In August 2009, BSI filed a proposal with ISO to develop a global asset management standard for physical assets based on PAS 55. Fast forward to the present, the international standard for management of physical assets, ISO 55000, is about to become official. This represents a compressed time schedule for this type of initiative.

The lack of an asset management standard has left E&P companies to their own devices to determine best practices. Formal industry standards provide a framework for both economies of design and improved product and service quality. Standards facilitate interoperability, production improvements, and scalability of asset management programs among different industries and between plants. Standards can also help improve quality of life by contributing to safety, human health, and environmental protection. Unless mandated by regulatory bodies, standards compliance is voluntary; however, it demonstrates an organization's commitment to quality, performance, or safety.

In the past, ARC expressed the opinion that the incentive needed to move asset management forward would come from the judicial system. Prosecuting executives responsible for industrial operations in the event of a fatal accident or serious environmental damage to the full extent of the law would set an example for others.

However, ARC now believes that a more subtle incentive – the basic need to obtain insurance coverage – will be more effective in getting companies interested in implementing strategic asset management. Risk management and insurance premiums go hand in hand.

A company's ability to demonstrate risk reissues, asset reliability, mitigation of loss, and avoidance of unplanned outages has always impacted insurance costs. Without a formal standard as a guide, assessments are more arbitrary. A formal standard will change the game. ARC believes that within the foreseeable future, insurance companies will require ISO 55000 certification as a condition of providing insurance for asset-intensive industrial organizations. Considering the extreme liability costs and severe business consequences of recent asset-related incidents in the offshore oil and gas industry, this is likely to apply to companies in this sector as well.

A strategic approach to asset management should leverage the power embedded in various operations and maintenance applications to improve asset availability and utilization. No other departments in the organization have the potential to impact the bottom line as much as operations and maintenance. Oil and gas companies need to focus on relevant asset management issues from a business performance and financial perspective.

ARC senses a palpable shift in the practice of physical asset management as industrial organizations move from the early-adopter phase to the early-majority phase of the technology adoption curve. The early adopters have proven that it is possible to minimize unscheduled shutdowns, improve process and personnel safety, and protect the environment by managing capital asset health. These trailblazers are applying the information from asset management applications and the lessons learned to more cost-driven issues such as spares optimization. Determining the appropriate balance between the number of spares held in stock and sufficient quantity on hand based on asset criticality can reduce inventory costs and provide a financial rationalization for stock levels. The remote nature of many offshore E&P assets makes this particularly important.

Asset and/or risk managers should become familiar with the ISO 55000 asset management standard. An overview of the principles and technologies is available on the ISO website. Risk managers should consult with their insurance provider(s) to gain an understanding of what will be expected in terms of asset management actions and documentation going forward.

Paying lip service to asset management is not enough. Offshore E&P and other industrial organizations must pass the insurance "acid test," with documentation of the results achieved and gains realized as a result of asset and risk management programs.

More in Business Briefs