Wednesday, 23 April 2014

Safety Culture in the Canadian Oil and Gas Industry

Mike Doyle is the President of the CAGC – the Canadian Association of Geophysical Contractors - representing the business interests of the seismic industry within Canada.
The CAGC website may be found at
In late 2013 the National Energy Board along with the two Offshore Boards put a draft safety culture framework for the Oil and Gas Industry. The Government’s concern is one of process safety in which the ultimate failure is catastrophic events that cause human fatalities/deaths and/or severe environmental damages. The full context can be found at the following link however this column only captures the very brief outline from the site and then excerpts from the Canadian Association of Petroleum Producers (CAPP) that represents much of Industry’s position.
From the website
Advancing Safety in the Oil and Gas Industry - Draft Safety Culture Framework
The National Energy Board, the Canada Nova Scotia Offshore Petroleum Board, and Canada-Newfoundland and Labrador Offshore Petroleum Board put safety and environmental protection at the forefront of their responsibilities in protecting Canadians by taking a leadership role to improve awareness and drive fundamental change when and where it is needed.
Safety Culture is an emerging discipline in the oil and gas sector that requires greater understanding and consideration.  The draft Safety Culture definition and framework are intended to promote learning and shared understanding of the concept of Safety Culture. It is also articulates the expectation that companies regulated by the NEB should build and maintain a positive Safety Culture while remaining vigilant to potential threats.
Safety Culture may be defined as the attitudes, values, norms and beliefs that a particular group of people shares with respect to risk and safety.
Culture influences almost everything including what people see, hear, feel and say. Perhaps most importantly, it influences the decisions and actions of people in an organization. These behaviours ultimately drive safety outcomes and company performance.
A strong Safety Culture and well implemented management systems provide additional layers of protection against catastrophic accidents.  A strong Safety Culture equals safer operations.
Safety Culture frameworks serve to simplify and communicate a complex concept by breaking it down into distinct dimensions in order to support its understanding and assessment.
This body of work was created to promote learning and a shared understanding of the emerging discipline of Safety Culture across the oil and gas sector in Canada.  It is also intended to express the Board’s expectations of regulated companies to build and sustain a positive Safety Culture. A strong Safety Culture also sets companies up to scrutinize their operations for potential cultural threats.

Excerpts from CAPP’s response – January 30, 2014
Safety Culture is a key dimension of overall safety management. The oil and gas industry welcomes the opportunity to engage with the three Regulators with the collective objective of safety performance improvement across the industry.
Canada’s six major oil and gas trade associations - Canadian Association of Geophysical Contractors (CAGC), Canadian Association of Oilwell Drilling Contractors (CAODC), Canadian Association of Petroleum Producers (CAPP), Canadian Energy Pipeline Association (CEPA), Petroleum Services Association of Canada (PSAC), and Explorers and Producers Association of Canada (EPAC) - working with our safety association, Enform, are also committed to improving safety culture in our industry.
We support the promotion of shared learning, understanding and communication and believe there is considerable value in collaboration with Regulators to reach an agreed and transparent strategy on how to improve safety culture in organizations. We believe that the engagement and involvement of industry is crucial to provide the understanding, leadership and technical resources necessary to build on the significant improvements that industry has already made in this area.
Safety Culture has been a major focus for the industry for many years and there are a considerable number of learnings and examples within our industry. We agree that improving and re-enforcing safety culture is an important part of safety management; however we believe that the starting point should be to establish an initial common understanding of “safety culture” as it applies to the oil and gas industry.
One key element missing in the framework is the recognition that the regulators themselves have a significant impact on safety culture. We support comments made by others in their submission, specifically that the draft framework does not recognize the unintended consequences of regulators and regulation on the industry’s management of safety.
Regulators are in a unique position to provide leadership, clarify expectations and support industry as it strives to improve safety performance. However it is not helpful that the Regulators seem to be unclear or undecided as to what use will be made of this safety culture framework going forward. This creates an issue in providing feedback, since the application of the framework is currently unknown to us. For example, the use of this model as part of future safety regulation would do little to advance (and could actually restrict) the development of safety culture in the industry as it comes into conflict with existing non-regulated models, best practices and industry guidelines currently being used effectively by industry. It is our belief that whatever framework or tools are developed, it should be left to individual organizations to decide how best to apply them based on the risks they manage. Regulators can then examine the effectiveness of implementation and resulting performance accordingly.
Safety Culture in the Oil and Gas Industry
The oil and gas industry has long recognized the key role played by a positive safety culture as a component part in delivering personal safety, and in the prevention of major incidents. Over many years, oil and gas operators and their contracting companies have worked together to build and improve safety culture across the industry. These efforts, which extend from employee performance assessments to contractor selection and from site/facility safety orientations to supervisor leadership and competency, have played a significant role in the management of safe operations for decades. We contend that safety culture should be viewed not as  the “emerging discipline” as suggested in the NEB framework, but rather as part of a long journey of safety performance improvement, which have been on for some considerable time.
We agree that the impetus for many safety improvement initiatives has been from major events that have occurred across all process industries. The Upstream Petroleum Industry Task Force on Safety (UPITFOS 1988) Recommendations resulted in many changes to the way that safety is managed across the industry. The Task Force stated that it “strongly believes that the ultimate responsibility for improved safety performance lies with senior management of individual companies in the industry”. This statement remains valid today.
Probably the most significant event in the oil and gas industry occurred in July 1988, when the offshore production platform Piper Alpha was lost in the North Sea resulting in 167 fatalities. The Cullen Report into this disaster has been the framework for many Regulations and changes in the management of safety across the global oil and gas industry, including in Canada. However, Lord Cullen stated, at the 2013 UK Oil & Gas conference on the25th anniversary of Piper Alpha, that “no amount of regulations can make up for deficiencies in the quality of management of safety. That quality depends critically on effective safe leadership at all levels and the commitment of the whole workforce to give priority to safety”.
CAPP requires its members to report all employee and contractor recordable injuries. An examination of the last 8 years of data (2004 to 2012) reveals that the overall industry total recordable rates have more than halved over this period. In addition to the reduction in the total number of overall injured personnel, the total number of safety exposure hours worked by CAPP members and their contractors has doubled. We believe these results represent the considerable effort made by industry to improve overall safety performance and demonstrate that the industry has been focused on improvement in safety culture and safety performance for some time.
We agree, and confirm our own experience has shown, that strong senior leadership commitment is fundamental to ensuring that appropriate resources are made available so that employees and contractors put safety ahead of commercial pressures.
We would also like to emphasize the key role of front line work supervisors – empowered by senior leaders – to build and improve overall safety culture. It is for this reason that the industry spends considerable resources to train first level supervisors in this accountability. As an example, Enform published the Supervisor Competency Guideline for use in the Western Canada conventional oil industry. The guideline offers a perspective on the competencies required for supervisors to achieve responsibility and activities, knowledge and skills that are expected to enhance a supervisor’s performance.
Safety Management Systems
Safety management systems, commonly coupled with environmental compliance requirements, have long been used to implement policy and standards consistently across organizations in the oil and gas industry. We recognize that this is, and will remain, a work in progress as new hazards and challenges confront the industry, new personnel join our workforces and new regulations are introduced.
We agree that there have been, and continue to be, issues relating to the implementation of management systems. These are not unique to the oil and gas industry. One key issue is the need to provide significant documentation to meet regulatory requirements as proof of compliance. This has contributed to creating a paradigm, in some workforces, that management systems are over-documented bureaucratic mechanisms that do little to improve overall safety. The link between management systems, control of risk and personal attitudes to safety can sometimes be lost as a result. This is unfortunate, as we agree that effective and fully implemented management systems are key to ensuring safe operations.
We also believe that every management system requires a robust system of assurance to validate the active monitoring processes and performance indicators required to ensure that the management systems remains effective.
Building a Safety Culture
We believe a positive Safety Culture is a learned behavior whose impact is felt most at the front line of our business – where our workforce faces the most risk. It is a primary tenet of risk management that those most at risk should be most involved in its management. For this reason we believe that there needs to be a concerted effort to simplify the approach to safety culture in a way that engages our workforce. Whereas the proposed framework builds on established incident and barrier management concepts, there is a real need to translate this into meaningful and effective methods for building a safety culture across industry.
The most effective results come from moment to moment focus on safety by supervision and the gradual individual acceptance that all unplanned events and incidents are preventable – when the tools, controls, carriers and systems provided, are applied effectively. In this way, safety is given the highest priority by all members of the workforce because they have understood and accepted their accountability, not because regulations require it. 
For safety to be the highest priority in day to day work, first line supervisors need to continuously coach and enforce performance expectations. It is through this leadership that personnel learn and then demonstrate the behaviors that reflect this accountability.
Process Safety
Process Safety has been a particular focus for the industry over recent years and this has resulted in numerous initiatives within the industry to improve the management of barriers that prevent the loss of primary containment and the escalation that typically leads to major events.
Contractor Management
The oil and gas industry contractor workforce contribute approximately 75% of the total exposure hours and yet suffer 85% of the injuries. This is partly due to their “hands on” work that increases their risk. But it is also a result of the challenges faced by license holders to build and maintain a positive safety culture with a dynamic work force. For this reason, license holders expend considerable resources on the prequalification processes to select contractors they believe have the competency to perform the work safely and to ensure that they bring their own positive safety culture to the work site.
When implementing a contractual arrangement, we believe that care must be taken in imposing or implying client level standards on the contractor. There are concerns that this prevents or removes some elements of growth and responsibility from that contractor.
Most of the contractors in our industry have established safety management systems and many are accredited and certified by independent audit through the Enform Certificate of Recognition Program. Many of the cultural defense descriptors contained in the draft Safety Culture Framework are included in these Enform COR audits. Enform serves as a certifying partner for this program and audits around 3,000 employers health and safety management systems annually in British Columbia, Alberta, and Saskatchewan. Operator’s often conduct their own audits of key contractor’s safety management systems as well.
Safety is Good Business
We recognize that safety is good business and without the active and successful management of the hazards our industry face, the industry would compromise its access to the resource and social license to operate.
The oil and gas industry continues to look for opportunities to improve overall safety performance and we acknowledge that overall safety culture across our industry is not uniform and there are opportunities for improvement.
We believe that the best results will be obtained by a joint systematic examination of all the contributors to safety performance in our industry today. In carrying out this analysis, we can build a strategy that industry can implement, not necessarily through increased process/procedures and regulation, but rather by identifying proven opportunities for improvement and enabling their success by working together towards this common objective.
From the Thursday Files
Genius might be the ability to say a profound thing in a simple way.
Charles Bukowski

Friday, 4 April 2014

Current and future energy features and trends, goals and strategies for sustainable energy

Mike Doyle is the President of the CAGC – the Canadian Association of Geophysical Contractors - representing the business interests of the seismic industry within Canada.
The CAGC website may be found at

In December 2013 I attended an evening at the Bon Mot Book Club in Calgary featuring author George Friedman and his book The Next 100 Years. I think it is safe to say the farther out you try to predict the more likely you are wrong however the author’s structure of modern history was very interesting. A couple of conclusions that I found interesting which he made were as follows: 1) In order to control the globe and/or be a superpower you must control the oceans; 2) China is split geographically with coastal areas being quite affluent and inner-land areas being quite poor. The only thing that has kept the country from civil war is the unbelievable growth curve. This will not be sustainable. Look for civil unrest to follow; 3) Russia is always concerned about the countries that border it to the west and the south in terms of maintaining distance from Europe and Turkey; 4) US Foreign policy is not to necessarily win wars but to create general instability in areas where it enters.

The book was written in 2009 and a number of his points are becoming more and more salient as Russia moves into the Crimean area of Ukraine. US Air force bases will close in July 2014 in Kyrgyzstan as the country has voted to not renew the agreement. Obama has been quite passive as far as anything to do with military during his tenure.

As it is Spring of a new year, it looks to be an interesting year ahead with geopolitics and the continuing dichotomy of the energy world we live in. Graham Campbell, has recently headed up the Energy Council of Canada. He gave a keynote address to the International Relations Society at the University of Toronto in January 2014.  As part of the address he identified ten salient points on current and future energy features and trends, goals and strategies for sustainable energy. This portion of the talk follows. It is well worth the read.

Graham Campbell
Energy Council of Canada
Energy Features and Trends,
Goals and Strategies for Sustainable Energy
Keynote Address
Fueling the Future: The Role of Energy in International Relations
2014 Annual Conference
International Relations Society, University of Toronto
January 25, 2014

1. Projections Say That Energy Demand Will Continue To Grow– Energy is one of the key factors supporting ongoing growth of the economy.  We enjoy more and more energy services - better lifestyles, more sophisticated products, bigger vehicles, and more electronic gadgets.  Growth in energy demand is the inevitable consequence.

For example, the World Energy Council has projected that global energy demand will grow by between 27% and 61% by 2050. Why the wide range?  Well, the lower projection arises from the ‘’Symphony’’ scenario.  It focuses on achieving environmental sustainability through internationally coordinated policies and practices.  The 61%
growth projection, called the ‘Jazz’’ scenario, focuses on energy equity with priority given to achieving individual access and affordability of energy through economic growth.

2. Most Growth Will Happen In China and India – This well-known trend has been apparent for a decade, but it is becoming even more pronounced.

The picture is even more dramatic as depicted by the International Energy Agency.  Demand in China and India will more than double by 2030.

The International Energy Agency’s projections of global demand growth, as published recently in the 2013 World Energy Outlook, make this point even more dramatically. From 2012 to 2035, 65% of the growth in demand will be in non-OECD (Organisation for Economic Co-operation and Development) Asia, the next largest share is 10% for the Middle East, 8% for Africa, 8% for Latin America.  The demand growth from now to 2015 is only 4% for all 28 OECD countries taken together!

3.  Fundamentally Different Supply Dynamics Are Happening – Think back no more than five years to the widespread dialogue, and anxiety, about ‘’peak oil’’. According to that picture, we had just passed the all-time high in oil production.  We looked forward, with much concern, to a steady decline in global oil production from then on.  Much hand wringing prevailed, although every geologist and exploration manager knew that the resource endowment picture was not like that at all.

Geologists do not think of resources not as a fixed quantity, like a precise number of marbles in a jar.  Rather they think of resources as being found in a continuum from cheap, easily recoverable resources, to greater quantities which are more difficult and costly to find and produce.

Conceptually think of a ‘’resource triangle’’.  The easily recoverable reserves have been produced.  But technologies developed and used decades earlier to win production from tight reservoirs have been refined and applied to reservoirs previously believed to be uneconomic.

How quickly the supply scene has changed as a result of tapping into a new part of the resource base.  The statistics are startling. As reported last week at a conference in Washington, natural gas production is expected to grow by 7.3 Bcf per day in the eight years between 2012 and 2020, compared to a growth in production of 7.3 Bcf per day over the 25 years from 1987 to 2012. The drilling time for a gas production well today is less than 7 days with a horizontal reach of 4500 feet, compared to 17.6 days and a reach of 2000 feet a few years ago. As expected, the new supply has caused a dramatic and sustained fall in market prices for natural gas.

Similar aggressive upward trends are seen for oil production from shale reservoirs.

As a result, the perception has changed from supply shortage to supply abundance due to aggressive application of new extraction technologies to a previously untapped component of gas and oil resources.  As we shall see in a moment, this dramatically changed supply picture has equally dramatic implications for geopolitics as well.

Of course, these supply cost decreases are not just for fossil fuels.  We have witnessed comparable changes in trends in cost reduction for solar PV cells.  According to the Solar Energy Industries Association, costs per watt for solar PV cells in 2013 have dropped to one third of the costs seen 12 years ago.

4. Fuel Shares Will Change – But Fossil Energy Remains Dominant

With all the expectations for generating electricity from renewable energy resources, projections by well-respected researchers all point to the same conclusion – fossil fuels will continue to be the mainstay for meeting global energy demand for the foreseeable future.

The International Energy Agencies projects this in their forecast out to 2030.    Total demand grows by 50% Mtoe (million tonnes of oil equivalent) over this period, and natural gas and coal show the most aggressive growth in this 2005 projection.

The IEA’s 2013 World Energy Outlook, which has captured the latest changes in the supply picture, compares the growth in components of total primary energy demand from
2011 to 2035. The growth in the use of fossil resources natural gas and coal dominate this picture.  58% of the demand growth will be met by fossil fuels, with 32% from natural gas, reflecting the shale gas revolution. Over 30% comes from renewables, reflecting the growth in the use of wind technology and solar PV.  This is an encouraging pace of growth for renewables from 2011 to 2035.

But our thinking about international energy supply can remain based on continued use of fossil fuels for some time to come.

5. Energy’s Negative Impacts Are Increasing

Matched to the ongoing use of fossil fuels are the trends in environmental impacts from energy-related activities.  Unfortunately, the environmental impacts are worsening. Of course, this view is based on the assumed continued use of conventional technologies – for example, coal-fired power plants without carbon capture and storage, and conventional vehicles powered by fossil fuels. This conventional approach, coupled with the combination of growing demand for energy services, the projections for continued reliance on fossil fuels, and the lack of effective regulations and practical technologies to control the environmental impacts, suggests that the negative impacts will continue to grow.

Most of the growth comes from developing countries.  For instance, absent widespread use of new capture technologies within fossil-fuelled electricity plants, the pattern of growth of emissions matches the growth in energy demand.

The International Energy Agency has published an interesting way to look at the
gradually increasing level of CO2 concentration in the atmosphere in three time slices.  If we look back to the start of the industrial revolution to 2011 and add up all emissions that have been put into the atmosphere since then, we are 56% of our way to the CO2 concentration level that is expected to produce a +2 C in global temperatures.  Projections of emissions levels from 2012 to 3035 add another 39% to the concentrations to produce
+ 2 C.  It is clear that we don’t have far to go after 2035 to reach the threshold concentration limit.

In addition to GHG emissions, energy activities are responsible for other significant environmental impacts – fresh water consumption, land-use impacts, and a variety of other environmental emissions such as mercury and particulate emissions from coal-fired power plants.  On a positive note, technologies and operating practices are being implemented now by the leading companies in industry to reduce and remediate such impacts.

6. Global Attempts To Tackle Environmental Issues Have Failed

This part of the story has both negative and positive dimensions.

First, on the negative side of the equation, the failure of international agreements to bring global focus on real solutions only makes matters worse.  The underlying causes include the tendency for countries to be concerned about their competitive attractiveness rather than implement GHG policies which could potentially damage their economic performance.  Also, countries which are projected to make the largest contributions to future environmental impacts have not, prior to 2009, been parties to the agreements.

The 2009 Copenhagen Accord, the most recent international mutual target-setting agreement, was based on the strategic goal of limiting the increase in global temperatures to + 2 C.  114 countries signed on, representing 80% of global emissions.

For Canada and the United States, the target was set at 17 % below 2005 levels by the year 2020.

On the positive side of the GHG picture, for some countries the amount of GHG emissions has been declining gently for the last five years.  This is due partially to the downturn in economic activity starting with the 2008 recession, and also to economic re- structuring. But energy policies are also having an effect. Examples are the impact of fuel efficiency standards for vehicles and energy efficiency improvements in buildings and industry.

For Canada, the recent trends are also heading in the right direction.  Another positive development is the steady decline in emissions intensity.  This is great news, particularly since the downward trend has been maintained over four decades.

7.  Energy Infrastructure Is Aging

For many countries, a significant fraction of their facilities for power generation and power transmission were constructed in the decades following World War II.

Power plants have a useful life of something like 40 to 50 years, although refurbishments towards the end of the plant’s life cycle can extend the expected lifetime by one to two decades.

For example, the graph shows the “Projected Decommissioning of Coal-fired Power
Plants in Canada’’ assuming a 40-year lifetime.  Roughly 50% of Canada’s capacity, or
8000 MW, will be decommissioned by 2015 and over 16,000 MW by 2030.  Although the country-specific details will differ, this pattern of upcoming retirements is similar for much of the energy infrastructure in place today.

A similar situation of aging infrastructure prevails for the major gas pipelines which span the continent.  Installation of TransCanada’s main line from Alberta to Ontario was started over 50 years ago.  Loops have been added since then to increase capacity. And replacements are done regularly of the most vulnerable sections in a carefully planned program.

What does this mean for international energy?  One answer is that significant capital requirements to replace aging infrastructure will be needed across the globe just to maintain the same level of energy supply.  This reinvestment provides an opportunity to deploy the latest clean energy technologies and novel approaches to electricity generation.  However, this opportunity will only be realized if companies invest in new technological solutions and new approaches.

8. Many New Technologies Are Emerging

Carbon capture and storage, electrified transportation, advanced distribution grids, second and third generation biofuels, and advanced reactor designs have emerged from research and development programs.  These promising technology solutions are the verge of being commercialized.  Such new technologies offer the potential to reduce emissions, use energy more wisely, and stimulate investment in new ways of doing energy across the globe.

Grid-scale electricity storage is an important missing piece in modern energy systems. Although practical examples of successful storage technologies are in operation today, such as pumped storage for hydroelectric systems as at Niagara, there is an acute need for large-capacity and cost effective storage technologies for use in regional and LDC (Local (Electrical) Distribution Companies in Ontario) networks.

9. Many Social Impacts Related To Energy

Here again there are both positive and a negative social impacts of energy supply, transportation, and end-use.

Energy activities support economic growth, contribute significantly to the international balance of trade for energy exporting countries, and create much-needed jobs, often in areas where there is little other economic activity.  The revenues and taxes from energy activities help pay for public services such as health care and education.

But at this point in global development, the benefits are not widely distributed.

Looking globally, one in six people, totaling 1.2 billion of the world’s 7.2 billion people do not have access to electricity for their homes.  This results in little opportunity for reading or study at night, limitations on family life and higher public safety risks. Further, 2.8 billion do not have clean cooking facilities.  Clearly, there are significant social issues associated with today’s global energy picture.

10. Geopolitics and Energy

There are many emerging examples of the interplay between energy developments and geopolitics.  One example is the implication of potential increased LNG exports from the United States to Europe.  A recent estimate of LNG exports is 4 Bcf per day to 8 Bcf per day by 2020 from the increased US supply from shale gas production.  The impact of this new supply on the European natural gas market could be lower prices for natural gas in Europe, even though European gas prices are significantly higher than current prices in North America.  The International Energy Agency has projected that increased global gas supply from shale gas reservoirs will lower international gas prices.  For the European market, prices could decrease from levels which are close to three times higher than
prices in the US in 2012 to levels just two times higher than US prices by 2035.

Let me illustrate this point about the geopolitical implications of increased natural gas supply in the United States.  The Centre for Strategic and International Studies in Washington published a short article in July 2013 on The Shifting Geopolitics of Natural Gas. The article starts by pointing out that shale gas production has surged from 1.3
Tcf per year to 8.5 Tcf per year between 2007 to 2012, making up 35 per cent of total
U.S. gas production.  The share from shale gas is expected to rise to close to 50% by
2030. The CSIS article observes that ‘’ … the unconventional gas revolution is already influencing geostrategic energy dynamics in important ways.’’

First, as noted above, the current supply picture suggests that the U.S. is not going to need imported LNG.  This frees up global LNG supplies for other markets and it is already resulting in a reduction in natural gas imports from Canada.  This means that countries that had previously been dependent on pipelined gas supplies will now have additional supply options and additional leverage when they re-negotiate long-term supply contracts.

Second, new shale gas technologies have opened up gas supply opportunities for countries with unexploited shale gas resources. The opportunity to develop a new domestic source of supply also opens up new questions – the environmental impacts of shale gas drilling and production, implications for use of water, and likely the need to develop new infrastructure to bring gas to market.  These can be tough questions to resolve, possibly with the additional challenge of negative public opinion.

The third point is in balancea sense the corollary of the previous point.  For countries which were counting on gas supply and revenues from gas production projects, the advent of abundant U.S. supply could have an impact on their investment plans and revenue projections.  Quoting from the CSIS paper ‘’For regions of the world whose development depends on investment and government income generated by natural resource production, this re-evaluation of project competitiveness may have significant consequences for domestic policy and economic reform”.

And fourth, the recent shale gas technology breakthrough has resulted in a significant change in perceptions about the long-term availability of oil and gas resources.  As noted earlier, rather than earlier anxious statements about ‘’peak oil’’, shortages in the near future, and rising prices, the tone has shifted to a more optimistic message about availability of resources in the long term.  As the CSIS article points out, ‘’Instead of asking if the world will run out of oil and gas, many people are starting to wonder what other frontier resources we will be able to access as technology progresses’’.

As we struggle to find balance in an uncertain world the only thing for certain is that change will continue. Competing priorities rarely allow for balance and often the unintended consequences have greater ramifications than the intended consequences.

From the Thursday Files
The farther reason looks the greater is the haze in which it loses itself.
Johann Georg Hamann