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UK safety regime in spotlight after Cullen inquiry report

A quarter of century after the Piper Alpha disaster, offshore regulations are once again top of the industry’s agenda

The loss of 167 lives on Occidental’s Piper Alpha platform in the North Sea remains the offshore oil industry’s worst disaster. While it seems clear the industry’s safety record has improved, there is little room for complacency in an industry still prone to major incidents and where the move into high pressure/high temperature environments is adding to risks.

The Piper Alpha disaster resulted from a gas leak whose ignition caused a fire that burnt through three gas risers leading to further leaks and explosions. Many of the more than 220 workers on the platform or involved in the rescue were trapped and unable to escape or be evacuated.

The disaster triggered a complete overhaul of safety regulations and procedures in the North Sea oil and gas industry, following a comprehensive inquiry led by Lord Cullen. The recommendations he made in his resulting report remain the backbone of health and safety regulation in the UK offshore sector today (See The Cullen Report and safety case regulations).

As a result of the Cullen Report, health and safety measures in the North Sea are now developed according to a so-called “safety case” regime, whereby licence holders are required to show they have minimised risks involved in their operations so they are “as low as reasonably practicable” (ALARP). Effectively, goals are set for the industry, to which it must then respond to the satisfaction of its regulator, the Health and Safety Executive (HSE). “Any risk assessment should answer the fundamental question of whether there is anything more that can be done to reduce the risk, while adding value,” the HSE says in its guidance for offshore installations.

This emphasis on an ALARP regime distinguishes the UK system from offshore safety regimes in many other major hydrocarbons-producing countries, though some share elements of the UK’s safety regime culture (see Management of selected offshore regimes).

In particular, there is a stark contrast with the regime employed in the US, where safety is governed largely by prescriptive rules imposed on the industry by the regulator, rather than the more flexible UK approach, which based on achieving targets.

The view at Oil & Gas UK, a trade association representing the bulk of the UK industry, is that there a system based on the safety case is more effective.

“[The UK regime] is hugely better than the very prescriptive approach used in the US, which is very ‘tick box-ish’. Goal setting is much more challenging for the industry and the regulator,” says Robert Patterson, health, safety and employment issues director at Oil & Gas UK.

He argues that the regime in place in the UK before the Piper Alpha disaster, which was more prescriptive than the current regime, stifled innovations that could have improved rig safety.

“In the latter days of those pre-Piper regulations, the regulatory authorities were having to give quite a lot of exemptions from the regulations to allow improvements to take place, because the regulations didn’t allow it,” Patterson says. Reliance on agreed measures rather than regulations may also help changes to be implemented faster than if new laws are needed, he adds.

It could be argued that this flexibility may also be a potential weakness, if the regulator, companies and the workforce do not pull together, introducing a grey area into regulation. The system is based on balancing risk against the cost and complexity of implementing measures, so companies can seek alternative methods of minimising risks, so long as those risks are deemed to remain ALARP.

That could prompt an operator to try to show that less risk protection could still meet ALARP conditions, while offsetting those risks through beneficial cost savings – so-called “reverse ALARP”. The HSE claims the legal requirement to make risks as low as reasonably practicable prevents it from accepting less protection in the control of risks than necessary, whatever the circumstances.

Improved safety record

The industry says a much improved safety record in the North Sea suggests the performance and risk-based approach used in the UK has proved itself. HSE figures show the number of hydrocarbon releases from offshore projects have fallen by 48% over the last three years, while the number of minor gas or oil leaks fell to 49 in the year 2012-13, the lowest level since data was first recorded in 1996.

However, there is no room for complacency. Major offshore incidents from the capsize of the Alexander Kielland semi-submersible accommodation platform in Norwegian waters in 1980, which killed in 123 people, through Piper Alpha, to the Deepwater Horizon blowout in 2010, which killed 11, were unforeseen – and all have led to major reviews of procedures designed to make the industry safer.

That Deepwater Horizon led to bitter legal arguments between operator BP and contractors over degrees of responsibility for the disaster suggests that management and oversight systems remain far from infallible in an era of increasingly complex offshore projects. One major legacy of that disaster has been an overhaul of the way in which exploration and production contracts are drawn up around the world, clarifying the responsibilities of licence holders and contractors.

Another legacy of the multi-billion dollar bill faced by BP and its contractors to settle claims from Deepwater Horizon are higher insurance premiums for E&P firms in all regions, including the North Sea. While the majors may be able to take the extra cost in their stride, the smaller companies that have moved in to replace them in less profitable small and depleted fields may find higher insurance eroding their profit margins significantly. That situation could prompt cash-strapped operators to seek to minimise the cost of safety measures.

Dangers remain

And as explorers active in the UK offshore are pushing into deeper Atlantic waters and higher-pressure environments in a quest to boost reserves, drilling and production risks are tangible. Smaller leaks may have declined in number, but the number of major releases climbed from three in 2011-12 to nine in 2012-13, the highest level in 14 years.

One, a gas leak from the G4 well at Total’s huge Elgin field 240km offshore Scotland in March 2012, resulted in the field being shutdown for a year. More than 200 workers had to be evacuated from Elgin and surrounding facilities. The leak of highly flammable sour gas took more the seven weeks to kill with mud, before being plugged with concrete. Total has said an unexpected gas release together with pipe corrosion caused by a chemical reaction between bromide in drilling fluid and grease in the pipework under high pressure may have played a role.

Earlier this year, the HSE, which is preparing a report on the incident, accepted a new safety case from Total allowing the French company to re-start production from Elgin in March. Tighter rules governing the field meant Total was required to kill at least 10 of the 19 wells in the field over three years by injecting each well with around 800 metres of cement.

Meanwhile, union leaders representing North Sea workers have acknowledged that overall safety has improved since Piper Alpha, but have criticised aspects of the health and safety regime. Jake Molloy, regional organiser of the RMT union, recently said safety consultations with workers and safety reps were inadequate and that workers felt under pressure not to complain about safety issues for fear of losing their jobs. Oil & Gas UK says it does not recognise this view, noting that a forum known as Step Change in Safety exists where the where the industry and the unions regularly discuss such matters.

Patterson stresses the industry must not be complacent, while pointing out that no recent gas leaks have resulted in a fire, as happened on Piper Alpha. He says that indicates that the safety case regime and the implementation of multiple barriers designed to prevent accidents escalating have made a difference and that the ALARP system will ensure safety measures will minimise risks even when working in high pressure environments.

Lord Cullen, who has said little about his report since its publication, has chosen the 25th anniversary of the Piper Alpha disaster to highlight the safety challenges that continue to face the industry, as it tackles ever harsher offshore conditions and works with ageing equipment.

Cullen says one of the key outcomes of his investigations was the realisation that a stronger focus on better quality of safety management was crucial to averting such disasters, rather than just looking at technical shortcomings and human error.

“That is true today in the same sense it was true in 1988,” told the BBC in a recent interview. “We have done a great deal to reduce the risk and the rest is over to the way in which management handles its safety arrangements,” he added.

New challenges

The UK regime also faces change from other directions. It had faced the prospect of complying with a new EU regulatory regime on safety, which the industry claims would have been expensive and time-consuming to enforce and potentially more prescriptive and less effective than the existing regime. However, following consultations, the European Commission changed track and decided to introduce a directive, which leaves more power in the hands of individual countries, rather than a regulation.

Meanwhile, a referendum scheduled for September 2014 could result in Scottish independence from the UK. If that happens, the North Sea hydrocarbons industry – most of which operates in Scottish waters – could face changes in all aspects of its operations from the fiscal framework to the safety regime.

The Scottish government released a paper in July, which set out to reassure the industry that it would maintain stability and predictability. However, there is little in it to indicate what a post-independence safety regime might look like. The Scottish government has also set up a commission to investigate how the oil industry could be developed – a move that suggests uncertainties are unlikely to be resolved until it reports back at the earliest.

The Cullen Report and safety case regulations

 A 13-month inquiry into the causes of the Piper Alpha disaster, led by Lord Cullen, resulted in a report that recommended 106 changes to the health and safety regime of the UK offshore oil and gas sector. All of his recommendations were adopted by the industry.

Key outcomes included:

Transfer of responsibility for safety issues away from the Department of Energy (DoE) to the Health and Safety Executive (HSE). Cullen highlighted a potential conflict of interest in the DoE’s responsibility for both hydrocarbons production and health and safety. It also noted the DoE was inadequately staffed to monitor safety issues effectively.

The creation of offshore installations safety case regulations, introduced in 1993 and updated in 2005. In general terms, these put the onus on offshore license holders to produce a  “safety case” document showing they have: 

• Identified hazards;

• evaluated risk levels; and

• Demonstrated that measures will be in place to control risks so that they are “as low as reasonably practicable” (ALARP).

Improvements to overall system management, improving coordination between all stakeholders, including the HSE, operators and the workforce. The “permit to work” system, designed to ensure rig workers were properly trained and ensure safe operations, was overhauled: the Cullen report concluded it was as based on “informal and unsafe practice” and was knowingly flouted by Piper Alpha operator Occidental.

Changes to rig and infrastructure design, including the introduction of a series of “barriers” to prevent escalation of potentially dangerous situations, changes to pipeline emergency shutdown valves, installation of sub-sea pipeline isolation systems. The industry also implemented measures to mitigate smoke hazards and  more open-sided rig designs were introduced to prevent gas build-ups within the structure, as occurred on Piper Alpha.  

Improvements to evacuation and escape systems and the provision of a safe haven for workers in event of an incident. In some cases, worker accommodation is now on a different structure from the rig itself.   

The 2005 revision of the safety case eased the administrative burden on the industry by removing a requirement for operators to re-submit their safety cases every three years. Safety cases are now valid for the lifetime of a project, but require a “thorough review” every five years.

Management of selected offshore regimes

Sources: Pembina Institute, Petroleum Economist

UK:

Regulator: Health and Safety Executive (HSE)

Uses performance-based approach. Operators must demonstrate that they are taking measures to minimize hazards and risks to “as low as reasonably practicable” (ALARP). Management systems not prescribed by HSE. Measures developed from compilation of a “safety case” to the regulator.

UK has one main statute and various other general laws that regulate specific aspects of offshore drilling.

US:

Regulator: Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE).

Largely uses prescriptive regulations, often incorporating industry standards.

Management systems prescribed by BOEMRE. Referred to as Safety and Environmental Management Systems (SEMS).

US has one main statute and various general laws that regulate specific aspects of offshore drilling.

Norway:

Regulator: Petroleum Safety Authority (PSA)

Performance-based approach with guidelines and recommended standards.

Management systems not prescribed by PSA. Created by the developer as part of its risk management strategy.

Uses many separate statutes to regulate various aspects of offshore drilling.

Canada:

Regulator: National Energy Board (NEB).

Hybrid approach, mixing prescriptive and performance-based regulations.

Safety and environmental processes and goals of the management systems prescribed by NEB.

Arctic offshore drilling regulated using Canada Oil and Gas Operations Act and regulations. Other legislation governs some aspects of offshore drilling.

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