Judy Maksoud
International Editor
Oil and gas exploration is an inherently risky business, but much of the risk associated with E&P is quantifiable and manageable. Counter to common belief, however, managing risk is not just managing health and safety issues. Managing risk is managing money.
Companies today face increased complexity and uncertainty, making it difficult to manage technical and business risks. Stakeholder tolerance for failure to manage risk is low. Meanwhile, regulators and authorities are developing stricter requirements. As failure to manage risks can be fatal, consistency and control are becoming even more critical.
Factoring risk into projects makes good financial sense, according to Robin Pitblado, global risk fellow at Det Norske Veritas.
Accidents in the oil and gas industry cost a lot of money. In fact, lost production often costs more than insurance premiums, and a bad accident costs much more than lost production, Pitblado said. Worse yet, lost investor confidence can translate into plummeting share prices.
Riskex
According to Pitblado, factoring risk into project costing is imperative. "Riskex (risk expenditure) is real," Pitblado said. The riskex approach to project management incorporates true business risk exposure through the capital expenditure and operating expenditure phases of a project and links riskex to routine decision making.
Risk assessment protects the entire future of a company as well as protecting lives and material assets. That is one of the reasons that oil companies are doing risk assessment. "It is good business sense," Pitblado said.
The challenge is changing misperceptions about risk, according to Pitblado. "The oil and gas industries don't need much more documentation, data, or risk assessment than is generated today," Pitblado said. Instead, they need to use the knowledge of risk to make infor-med risk-based operational decisions.
It is up to risk analysts to assist companies in managing their bus-iness, Pitblado said. Filling this void has become a goal for DNV and other companies specializing in risk assessment.
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The new risk reality
José Pontes, DNV's regional manager for South America, cited the changing business environment as an impetus for more risk management. Regulators have set rigorous standards that are complicated by deepwater and challenging environments as well as the fact that companies are facing new technological challenges. "We are living in a new risk reality," Pontes said.
DNV's role, according to Pontes, is to use its risk and reliability competence and in-depth technical knowledge to help companies manage risk. The objective, he said, is to incorporate risk management in the whole life cycle of their operations.
The company goes about reaching that objective by supporting companies such that the approach to risk and use of technology are sound and sustainable, leading to efficient, safe, and profitable use of assets.
DNV's Rio de Janeiro office has focused for nearly three decades on supporting customers in the use of technology. "Combining risk, reliability, and technical knowledge is the most efficient means to achieving the goal of managing risk," Pontes said.
DNV achieves that end by providing risk analysis and practical ways to implement solutions and through specialized software designed and created by risk professionals. "DNV is proud of developing extremely good tools," Pontes said.
Some of those tools are software programs that help identify and manage risk.
DNV software solutions are being used by a number of operators around the globe. Brazil's state-owned petroleum company, Petrobras, in particular, is using DNV software to design and manage its deepwater developments. In fact, Petrobras has contracted with a number of classification agencies to become involved in the company's risk management program.
Petrobras P-36 brings changes
According to Pitblado, the most significant changes in standards and risk management follow big accidents.
This was certainly true for Petrobras following the sinking of the P-36, a production semisubmersible that sank offshore Brazil in March 2001, killing 11 people. "The P-36 incident provoked a change in Petrobras culture from design to operation," Gustavo Castro, manager of E&P structural and naval technology for Petrobras, said.
Alberto Almeida, Petrobras' general manager of E&P production engineering agreed: "Our demand for risk assessment service increased considerably following the incident."
Within eight weeks of the accident, Petrobras had established its program for excellence in operation (PEO) for floating production units. The program covered 13 actions and took three years to complete. The result is that some processes that were developed for addressing risk are still underway.
"The P-36 incident made Petro-bras even more careful with project development," Almeida said.
Risk assessment is now routine in new projects and is an integral part of operations.
According to Castro, "Risk assessment is an important tool that Petrobras has now mandated as part of project development." In fact, the company is working with several classification companies to manage risk, Castro said.
"P-36 taught a lot of lessons, not only for Brazil, but for all of the oil industry all over the world," Almeida said.
One of the lessons that Petrobras took to heart is that risk assessment needs to be part of the design phase of every project.
Risk in the design process
A significant development that followed the loss of the P-36, was the formal incorporation of risk and reliability analyses in the conceptual, front-end engineering and design and detailed engineering phases of each new project undertaken by Petrobras, according to Luiz Oliveira, manager of DNV Principia, DNV's risk and reliability unit in South America.
According to Oliveira, "There are about 20 different kinds of studies that are done for Petrobras' projects." RAM studies evaluate reliability, availability, and maintainability for each project, and quantitative risk assessment is conducted for fire, explosion, and ship collision, among other emergency situations.
Though DNV is capable of conducting all of the studies, there are other companies that can perform some of them. The American Bureau of Shipping and Bureau Veritas, for example, perform risk studies for Petrobras as well, Oliveira said.
Oliveira explained how DNV provides risk and reliability evaluations at each of the three design stages. In a recent case, a decision had to be made regarding production from an offshore development. Petrobras was considering building five platforms and moving production via pipeline to onshore facilities for treatment and distribution. The alternative plan was to use FPSOs to produce the field.
DNV provided risk assessment for both options during the concept phase. Based on that information and on the results of economic studies, Petrobras chose to build a pipeline from offshore platforms to the refineries in São Paulo.
DNV's next task was to evaluate the reliability related to piping hydrocarbons to shore. The primary concern was determining how Petrobras would handle interruption of the combined 750,000 b/d of oil from the five platforms. Obviously, the pipeline transportation system had to be extremely reliable.
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Failure scenarios
Risk professionals at DNV worked with Petrobras engineers to determine failure scenarios for evaluation. Then, DNV carried out the analyses and presented recommendations based on reliability criteria supplied by Petrobras. In this way, weaknesses were identified, and new solutions reached, Oliveira said.
The next step in the process was the detailed engineering phase, during which platform layout and system integration underwent a complete quantitative risk assessment. The formal adoption of such comprehensive risk and reliability analyses is now an integral part of the design process for all new offshore installations built by Petrobras.
Another important development post-P-36 was the birth of an initiative between the classification societies (ABS, BV, and DNV) and Petrobras in which Petrobras engineers are working with classification societies' subject-matter experts to manage all of their floating units. The objective of this project, called gerenciamento integrado de engenharia naval (GIEN), is to ensure asset integrity of mobile offshore units. The program is far-reaching, including emergency response, structural analysis, stability analysis, hydrodynamic analysis, and mooring analysis for its mobile offshore units.
GIEN has also allowed Petrobras to incorporate risk when making modification to MOUs.
A significant portion of management is controlling around 500 documents per platform, including drawings used to provide risk analysis as well as engineering drawings. Through GIEN, Petrobras has been able to incorporate risk in all aspects of its work and to optimize asset in-service performance without compromising safety or environmental performance.
The future of risk
Historically, DNV focused on assessing risk and design safeguards. Recent events, however, are leading the company toward a more integrated approach to risk assessment that combines consultancy and software tools to provide safety critical information operators can use to best manage their projects. The changing risk reality requires changes in the way risk experts address risk.
According to Pitblado, "It is up to risk analysts to assist companies by extending their findings on critical barriers in a way that allows managers to recognize when barriers are not working or have degraded and to help them modify operational activities to take account of the weakened defenses."
DNV is actively working toward that goal by establishing relationships with operators and providing risk management that frees them to make more sound business decisions.
