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6 Apr 2016

President’s Column: Sustainability and the Role of Petroleum Engineers

There are many definitions of sustainability, but the 1987 United Nations Brundtland Commission’s remains a standard: “Meeting the needs of today without compromising the ability of future generations to meet their own needs.”

Nathan Meehan

Some think oil and gas have little role in a sustainable ­future; global realities suggest otherwise. How is it that a finite energy resource and a source of greenhouse gas emissions can be part of a sustainable future? Oil and gas are ­essential to meeting the “needs of today;” their prudent use is the safest way to ensure we do not compromise the “ability of future generations to meet their own needs.”

The Society of Petroleum Engineers Board of Directors adopted the following definition of sustainability in 2014: “Exploration, development, and production of oil and gas resources provide affordable energy that contributes significantly to well-being and prosperity.

“SPE encourages the responsible management of these oil and gas resources and operations including the appropriate management of social and environmental impacts and their related risks.

“SPE demonstrates this commitment by offering its members opportunities to train, share knowledge, and advance practices for doing business in ways that balance economic growth, social development, and environmental protection to meet societal needs today and in the future.”

Petrowiki also has an excellent discussion of sustainability, including references to noteworthy papers from www.OnePetro.org.

Safe, affordable energy is central to quality of life. It is essential for farmers to be able to produce sufficient food; for the transportation of this food to consumers; and for housing, heating and cooling, clothing, and all other necessities of life. Quality of life is strongly correlated to energy use.

Supplying energy for the world is a monumental task. There continue to be improvements in renewable energy sources; however, reasonable forecasts of growth in renewables suggest fossil fuels will remain the primary source of the world’s energy for decades to come. Only radical growth in nuclear power could seriously diminish this result. The realities reflecting public concerns over nuclear safety and proliferation of radioactive materials make such growth unlikely.

While coal resources are abundant, concerns over greenhouse gas emissions and the possibilities of pricing carbon through taxes, caps, exchanges, or other mechanisms and the relatively low cost of natural gas continue to make natural gas a more attractive fuel. This is true whether you expect it to be a relatively near-term “bridge fuel” to a renewable future or (as I do) part of our longer-term energy solutions.

If oil and gas are to be part of a sustainable solution to our energy needs, there are some things we can and should do better as petroleum engineers.

Minimizing Methane Emissions
It is important to reduce or eliminate leaks and incidental releases of methane since, on a pound-for-pound basis, methane has a 25-times greater impact on climate change than does carbon dioxide. Natural gas and petroleum systems account for 29% of all US methane emissions. Domestic livestock and associated manure management account for 36%. Landfills and coal mining combined account for another 28%. In total, methane accounts for 10% of US greenhouse gas emissions. Methane emissions associated with natural gas and petroleum systems have declined significantly from 1990. In spite of substantial increases in natural gas production from 2005 and widespread growth of pipelines and processing facilities, the decline in emissions has continued. We must continue this progress and eliminate fugitive emissions of methane associated with oil and gas production, transportation, and processing. There will be a role for drones and other technologies in improving monitoring and early detection capabilities.

Reduce or Eliminate Flaring
Flaring should be infrequent, temporary, and efficient. Technologies to make flaring highly efficient are available and represent best current practices. Long-term flaring of volumes of gas that cannot be (easily) sold needs to be eliminated globally. This goal may require commitments to gas reinjection, local use, local power generation, local compressed natural gas manufacturing, or other innovative solutions. Regulators need to set aggressive but technically achievable standards and timetables. Regulatory agencies should focus on the largest problems first and use a balanced approach. Operators need to develop fields with the goal of eliminating flaring in mind. Unconventional (tight oil) operators in areas without low-pressure gathering systems will need to develop many-well drilling pads enabling sufficient volumes of natural gas to be used locally or otherwise exploited. In such cases, gas represents a secondary product so regulatory and taxing bodies should preferentially treat developments that use semicommercial volumes of gas rather than flaring it.

Energy Efficiency and Conservation
We should support energy efficiency measures. Such measures make the most sense when they have a reasonable economic benefit. The current price environment makes it more difficult to justify such measures, whether they involve a homeowner installing additional insulation or an airline purchasing more fuel-efficient airplanes. Government subsidies for such efficiency-improvement measures may make sense when widespread adoption of a marginally commercial solution will lead to cost reductions or significant improvements in the required technologies. Conservation measures imply a change in consumer behavior rather than just an improvement in efficiency. The current product price environment is less likely to encourage conservation efforts whether it is in transportation, recreation, or other decisions. Government actions mandating conservation efforts may be viewed as heavy-handed. The “carrot” approach is more likely to achieve results than the “stick.”

Wellbore Integrity
Wells completed with casing, liners, and cement prevent migration of fluids from one zone to another. Such integrity is vital to minimizing the likelihood that hydrocarbons or salt water might migrate behind pipe and contaminate other formations. Casing collapse, casing leaks, and inadequate primary cementing or deterioration of cement must be avoided and technologies implemented to ensure wellbore integrity. Cement-job design including spacers, quality control during implementation, and long-term monitoring ensure that desired fluids are produced and all other fluids stay in place. Advances in fiber-optic monitoring technology such as distributed acoustic sensing may be useful for monitoring critical wells.

Reducing Surface Footprint
When many wells need to be drilled, drilling from a central wellpad or cluster reduces surface footprint, minimizes transportation disruptions, and allows produced or flowback water to be used more effectively. It is also easier to operate and leads to shared use of production facilities and commercial use of small volumes of gas. Many individual unconventional wells are not commercial, even if the combined results of all wells drilled is economic. Many individual hydraulic fracture stages do not appear to contribute measurably to flow. Engineers must collaborate with earth scientists, petrophysicists, geomechanics professionals, service providers, and others to eliminate the need for unnecessary stages or wells. This will improve economic returns, lower the demand for water, and minimize all other environmental impacts of production.

Elimination of Spills
Whether a surface spill during oilfield operations or a catastrophic blowout, consistent planning, use of best available technology, and flawless execution are keys to eliminating spills. Eliminating small spills is good business. Eliminating large spills may mean staying in business. Blowout control eliminates spills and saves lives.

Optimized Field Development and Management
An asset team working on simulating reservoir performance and designing an optimized plan may not think of their work as contributing to sustainability. But the reality is that almost everything we do as petroleum engineers contributes to sustainability. Can we recover the most barrels with fewer wells? Can we invert the waterflood injection pattern and lower total fluid handling requirements? Can our well monitoring plans identify damaged wells early and allow them to operate at maximum efficiency? As we drill, complete, equip, and produce wells more efficiently, we are further contributing to sustainability. We make it possible to meet the world’s needs today and improve people’s lives by providing safe, affordable energy. The more efficient we are the more affordable that ­energy becomes.

Many oil and gas companies voluntarily issue a sustainability report and similar measures are in place for service companies and others. The real measure of our role in sustainability remains our individual commitment to doing the right job and getting that job done right. As I travel throughout the world, I am more convinced than ever that we as an industry, and as SPE members in particular, are committed to improving today’s quality of life, but not at the expense of the generations to come.

17 Mar 2016

Web Event Offers Preview of Sustainability Program at International HSE Conference

As the Society of Petroleum Engineers celebrates the 25th year of its flagship HSE conference, it marks another key milestone with the introduction of a standalone sustainability program. The program is a natural evolution of the oil and gas industry’s increasing awareness of its role in supporting societies to thrive and meet their needs within the natural cycles of nature.

This program has been designed by 40 experts from inside and outside the industry and brings to the conference four panel sessions addressing the most pressing sustainability issues for our industry—Sustainability as a Source of Innovation; Sustainability To Improve Performance; Climate Change—Past, Present, and Future; and Sharing the Water Commons.

A preview of the sustainability events at the conference will be presented online at 0930 on 30 March. Libby Cheney is set to be the moderator.

Cheney is a partner with TRIO Global Solutions, a firm that advises and consults on matters of sustainability and business resilience.

Cheney has more than 30 years of leadership experience in sustainability, HSE, strategic planning, operations, engineering, and project development. She joined Hess in March 2012 from Shell, where she spent 5 years, most recently as vice president of safety, environment, and sustainable development for exploration, development, and production assets in the Americas. Before joining Shell, Cheney was with ExxonMobil for 24 years, where she served in technical and operational roles.

Cheney holds a bachelor’s degree in chemical engineering from Vanderbilt University and is active in many civic and professional organizations, including the Offshore Energy Center in Houston, the Society of Petroleum Engineers, and the United Way of Greater Houston.

Register for the online preview here.

Read more about the international HSE conference here.

16 Mar 2016

Mexico Symposium Brings Experts Together To Collaborate for Future Growth

Prominent exploration and production (E&P) experts, operators, and regulators are set to participate in one of Mexico’s most important health, safety, and environment (HSE) technical events. The 2016 SPE Mexico Health, Safety, Environment, and Sustainability Symposium is set for 30–31 March in Mexico City at the Marriott Reforma Hotel. In attendance will be leaders from the Agency for Safety, Energy, and Environment; IPIECA; Pemex; and Sener.

With a theme of Collaboration for Future Growth, the event will have presentations on sustainability; the environment; economic growth; and HSE challenges facing in the E&P industry in Mexico.

Keynote and luncheon sessions will include Collaborating for Breakthroughs in Safe, Affordable Energy by Jack Hinton of Baker Hughes and Regulating To Establish a Safety and Environmental Protection Culture in the Mexican Oil and Gas Industry by Carlos de Regules with ASEA.

An executive plenary session, HSE and Sustainable Development License To Operate in Mexico, will feature panelists Alejandro Zagal of Pemex, Alberto de la Fuente of Shell, Krish Ravishankar of Oxy Oil and Gas, and Robert Sheninger of Talos Energy.

The closing session will feature a presentation titled HSSE-SR: Cardinal Directions for Navigating E&P Success in Mexico by 2015 SPE President Helge Hove Haldorsen of Statoil.

Attendees will have to opportunity to pick up a free copy of SPE’s new compendium Enhancing Process Safety in the Oil and Gas Industry.

Read more about the symposium here.

View the symposium program here (PDF).

Register for the symposium here.

2 Mar 2016

Industrial-Sized Cyberattacks Threaten the Upstream Sector

The oil and gas industry is coming to terms with a cyberthreat landscape that has expanded beyond data breaches and the theft of intellectual property. The latest battlefront is in the field where critical drilling and production assets are at risk of being disrupted or destroyed, thanks to their highly vulnerable control systems.

Malware designed to infect operational networks that control oilfield machinery is on the rise, and security flaws make addressing the situation difficult. Image courtesy ElbPresse.

The industry has experienced only a few cases of these so-called cyber-to-physical attacks, but the US Department of Homeland Security predicts that, by 2018, cyberattacks against oil and gas infrastructure around the world will cost almost USD 1.9 billion. One of the most dire warnings comes from the multinational risk adviser and insurance firm Willis Group, which, in 2014, reported that “a major energy catastrophe, on the same scale as Piper Alpha, Phillips Pasadena, Exxon Valdez, or Deepwater Horizon,could indeed be caused by a cyberattack.” The company noted in its report that insurance providers generally will not cover such events.

The concern over control systems has come to the forefront because of the widespread use of digital oilfield technology that began about 2 decades ago. Driven by significant gains in efficiency and production, companies eagerly moved to tether nearly every facet of operational networks to the Internet, either directly or through corporate networks. On the plus side, the industry gained invaluable real-time data, various operations became automated, and engineers working in office buildings could remotely control offshore operations.

But the computer hardware that makes all of this possible was never designed to be connected to the Internet. Known collectively as Industrial Control Systems (ICS), they were built to run in isolation and thus have no security measures that guard against run-of-the-mill malware, let alone a targeted cyberattack launched by a sophisticated hacker.

“Security was not important for anyone; what was important was to have those systems operational,” said Ayman Al Issa, chief technologist and senior adviser of industrial cybersecurity at Booz Allen Hamilton. He added, “Based on our experience, it is easy to attack those systems—it is easy to attack thousands of them.”

Al Issa explained that the control systems are used not only in the oil and gas industry but in nearly every industry and utility sector around the world. Recent attacks on control systems in Europe prove that the digital oil field is at risk. The long list of assets using these exposed control systems includes drilling rigs, subsea wellheads, flowmeters, production facilities, pipelines, and artificial lift installations.

The industry is working on multiple fronts to address vulnerabilities, but cybersecurity experts working in the industry say it will be years before adequate safeguards are in place. Until then, oil and gas companies must face the reality that the hacker community has the advantage.

1 Mar 2016

Social License To Operate

“You don’t get your social license by going to a government ministry and making an application for one, or simply paying a fee. … It requires far more than money to truly become part of the communities in which you operate.”
— Pierre Lassonde, President of ­Newmont Mining Corp., 2003


There is widespread acceptance that extraction industries—including oil and gas—improve people’s lives and enable the economic growth of countries. However, at the project level, this acceptance is neither automatic nor unconditional.

The concept of a social license to operate (SLO) has been applied to extraction industries and has been defined as “a community’s perceptions of the acceptability of a company and its local operations” by Thomson and Boutilier (2011). Community can be very broadly defined to include stakeholders and interested parties well outside the immediate areas of operations, or “any group or individual who can affect or is affected by the achievement of the organization’s objectives” (Mitchell et al. 1997).

SLO is deemed to exist when a project has ongoing approval of the community. For any project to have SLO, it is necessary to earn and maintain the support—and ultimately trust—of the community. We have seen ample evidence, including in our own industry, that failure to do this can lead to conflict, delays, added costs, or even prohibition of projects. Because it is rooted in beliefs and perceptions, SLO is intangible. Beliefs and perceptions are subject to change with new information; SLO is nonpermanent. This presents challenges for companies who want to know the status of their SLO and what they need to do to maintain or improve it.

Fig. 1

Thomson and Boutilier developed a framework to measure beliefs, perceptions, and opinions that impact social license in the mining industry and published quantitative assessments of their framework. Fig. 1 represents their model and serves as a useful starting point for a discussion of SLO in the upstream oil and gas industry.

Measuring Social License
According to the Thomson and Boutilier framework, SLO exists in a four-level hierarchy, with withholding or withdrawal at the lowest level, followed by acceptance, approval, and co-­ownership, or psychological identification. To advance in the hierarchy, the project must meet criteria of legitimacy, credibility, and trust.

At the lowest level, SLO does not exist, and projects cannot proceed; the community perceives them as illegitimate. To be considered legitimate, an extraction operation must contribute to the well-being of the community, respect existing traditions and lifestyles, and be conducted in a manner the community considers fair. If the extraction project is not considered legitimate, the community either withholds or withdraws access—including legal license—to essential resources. Drilling permits fall under this category, as do restrictions prohibiting hydraulic fracturing imposed by a government. The social license to operate also can be withheld or withdrawn by removing essential financing, workforce availability, markets, etc. Examples of social licenses that have been withheld in our industry are the development of the Marcellus Shale in New York and development of unconventional resources in France. The driver for these licenses failing to rise to the level of acceptance is not primarily the complaints of local residents who could be directly affected by activity, but a larger concern at state or national levels arising from fears about hydraulic fracturing.

The next-higher level of social license is acceptance. This is the most common level in the SLO hierarchy. It may be granted grudgingly or reluctantly by parts of the community. Importantly, this level is just one level above the social license being withdrawn. While acceptance implies tolerance, there may be lingering or recurring issues, the presence of outside non­governmental organizations, and watchful monitoring.

While legitimacy and credibility lead to acceptance of a project, it is important for operators to be perceived as credible by the community at-large to rise to the level of approval. This level of license requires that operators and their contractors communicate openly and honestly with the community, deliver on the actions they promise, and provide benefits to the community. The hallmarks of the approval level are support for the project and participating companies, perception of the companies as good neighbors, and pride in collaborative achievements.

The highest level of social license—psychological identification, or co-ownership—can only occur when a high level of trust is present throughout the community. Building that level of trust requires consistency in communications and execution. Once it is established, project participants and the community engage in real dialogue. A substantial portion of the community and other stakeholders incorporate the project into their collective identity. The community often becomes an advocate or defender of the project since its members consider themselves to be co-owners and emotionally vested in its future. This level of social license should be industry’s objective.

Gaining Social License
Because SLO is intangible and dynamic, conflicting ideas among stakeholders can impact the level of license that is granted. Community members may have very low levels of trust for operators in general, yet be much more willing to believe individual employees whom they know and trust. Similarly, each community has specific issues and interests that form the basis for relationship building between it and the project operator. As a prerequisite for SLO, the operator should map and understand the social structure, issues, and vision of the various individuals, groups, and organizations that form the community.

Confidence in the status of a social license requires measuring it periodically and using the results to modify practice to improve the quality of the relationship between the project and the community. Uwiera-Gartner (2013) discussed some of the issues associated with communicating how hydraulic fracturing operations can be used in a way that protects the environment. Some early industry communication efforts emphasized pointing out flaws in public perception and media accounts instead of addressing a variety of public concerns. Uwiera-Gartner demonstrated that open and honest communication is essential to maintaining the social license.

Olawoyin et al. (2012) quantitatively illustrated the increasing number of potential violations of best practices that could result in environmental impacts associated with increased drilling activity. They emphasized the importance for operators to implement mitigation practices and focus on flawless execution. An industry reputation can suffer enormous damage when environmental damage or personnel injuries or fatalities occur.

Beliefs, opinions, and perceptions—and social license to operate—are subject to change as new information is acquired. It is important for the Society of Petroleum Engineers (SPE) members to be familiar with the many facets of the industry so they can communicate factual information. SPE’s website ­energy4me.org is an excellent source of such information.

Understanding the communities where we wish to work, conveying factual information, communicating honestly and openly, and acting in ways that build credibility and trust will help our industry and the companies that comprise it strengthen and maintain the quality of relationships to earn and maintain the highest level of social license—and the benefits that accompany it.

Lassonde, P. 2003. What Shade of Green Are You? Presentation to the Melbourne Mining Club. https://www.ausimm.com.au/content/docs/minclub130803.pdf.

Thomson, I. and Boutilier, R.G. 2011. Social license to operate. In SME Mining Engineering Handbook, ed. Darling, P., 1779–1796. Colorado, US: Society for Mining, Metallurgy and Exploration.

Mitchell, R.K., Agle, B.R. and Wood, D.J. 1997. Toward a Theory of Stakeholder Identification and Salience: Defining the Principle of Who and What Really Counts, The Acad Mgmt Rev, 22(4): 853–886.

Uwiera-Gartner, M. 2013. Groundwater Considerations of Shale Gas Developments Using Hydraulic Fracturing: Examples, Additional Study, and Social Responsibility. Presented at the SPE Unconventional Resources Conference, Calgary, Canada, 5–7 November. SPE 167233. http://dx.doi.org/10.2118/167233-MS.

Olawoyin, R., Wang, J.Y., and Oyewole, S.A. 2012. Environmental Safety Assessment of Drilling Operations in the Marcellus-Shale Gas Development. SPE Drill & Compl 18(2): 212–220. SPE 163095. http://dx.doi.org/10.2118/163095-PA.

29 Jan 2016

TeQ Shield Offers Improved Monitoring for Safer Workers

Confined-space work is one of the most challenging aspects of a maintenance project. According to the US Department of Labor, 481 fatalities occurred between 2005 and 2009. That is approximately one fatality every 4 days.

This considerable level of danger calls for extra safety measures such as constant visual and bio monitoring to ensure that incidents are managed effectively and prevented where possible.

TeQ Shield Guardian

TeQ Shield Guardian.

Launched by United Safety, TeQ Shield is an innovative technology designed to do just that. It combines gas detection, video surveillance, two-way communication, access control, permitting, quality control and assurance, personnel temperature control, and bio monitoring.

“Previously, we operated confined-space work with what you would call a blind side. The safety attendant is restricted to the outside of the vessel. Inside, accidents can occur if potential hazards such as fire, elevated temperatures, gas, fumes, vapor, or lack of oxygen are not properly managed. There was also no way to communicate directly with the workers inside,” said Sher Alizander, United Safety’s technical services manager.

With TeQ Shield Guardian, the safety operator monitors all confined-space work and gas levels, controls worker access information, and can communicate with personnel outside and inside the vessels. The TeQ Shield has a host of features, including cameras with day/night vision, two-way communication, video recorded along with gas-detection logs, and data that can be used for training or investigations.

Aside from the TeQ Shield Guardian, two other components of the TeQ Shield are the Bio and Therma. The TeQ Shield Bio is a system that can monitor vitals such as heart rate, breathing rate, and core body temperature of up to 64 workers simultaneously, thus giving operators real-time updates on the internal health of the workforce. The device can be worn conveniently by workers inside their coveralls to monitor their body functions. The device comes with rechargeable batteries that last up to 26 hours. Basic red, orange, and green alerts indicate when a worker needs attention. “If there’s an alert on a worker’s vitals, the system raises a clear warning signal for managers to take appropriate action before any incident can occur. Immediate actions can be taken to ensure that the worker gets the appropriate medical attention and support required,” said Elie Daher, executive vice president and chief marketing officer at United Safety.

TeQ Shield Therma, on the other hand, is an innovative temperature-control system based on compressed-air technology. Designed with worker safety and comfort in mind, TeQ Shield Therma vests can keep workers either cool or warm depending on their environmental needs. In hot temperatures, this prevents heat stress, while, in cold temperatures, it protects from hypothermia. In both situations, it results in safer workers with increased worker time on tools.

“The oil price crisis may have brought down profits in the oil and gas industry, but it has intensified the drive to innovate and bring cost-efficient technologies to the market. By monitoring a worker’s actual physiological state, innovations such as these can effectively prevent workplace injuries such as heat stress and heat stroke while increasing productivity,” Daher said.

Find more information on TeQ Shield here.

Read more about United Safety here.



18 Jan 2016

Panelist: Project Planning Must Consider Above-Ground Risks

In December 2015, HSE Now initiated a series of articles highlighting presentations from a panel of global experts at the 2015 SPE Annual Technical Conference and Exhibition in Houston, wherein the experts shared their perspectives on a topic of increasing strategic importance to the society’s global members: sustainable development. Titled “Value Preservation: Sustainability and Management of Above-Ground Risk,” the session was led by Alex James, global sustainability manager at Halliburton, and introduced by Helge Hove Haldorsen of Statoil, 2015 SPE president. The panelists were RoseAnne Franco of Verisk Maplecroft/Wood Mackenzie, Michael Oxman of Acorn International, Dan Domeracki of Schlumberger, and Alex Hohmann of Anadarko.

image002The first article featured remarks by Franco, director for oil and gas risk at Verisk Maplecroft, who addressed how gaining an understanding of holistic risks was critical for sound risk management. The next featured panelist is Michael Oxman. Oxman is a partner at Acorn International, where he helps clients achieve and preserve value through management of above-ground risk. He specializes in social performance, local content, reporting, and alignment with key international extractive industry good practices and standards. Oxman formerly was the director of energy and mining at BSR and has extensive economic and commercial experience through prior roles at Chevron, Price Waterhouse, and the Overseas Private Investment Corporation. He holds two masters degrees, in international affairs and business, from Columbia University and Rice University, respectively.

In his presentation, Oxman discusses recommendations and challenges associated with the application of sustainability principles across the asset life cycle.

Michael Oxman, Acorn International

  • In contrast to above-ground issues, technical risks (subsurface and facilities) are routinely analyzed with the support of advanced tools, techniques, and protocols.
  • Above-ground risks receive proportionately less attention and fewer resources devoted to understanding impacts on commercial planning and value realization.
  • Local knowledge of community and of site-specific social dynamics is not fully integrated into business planning and risk management.

    Fig. 1

    (Fig. 1 offers an example of a project that properly invested significant time and energy in government relations but did not adequately map key local stakeholders to understand potential impacts on project approvals.)

As a result of the preceding points, project schedules and forecasted budgets are often optimistic (at least in part because of not adequately factoring in political, commercial, social, or environmental risk). See Fig. 2.

Fig. 2

Fig. 2

  • Optimistic schedules and budgets create pressures on project managers that, in turn, may force reactive, under-resourced, or “siloed” actions between functions or departments, thereby exacerbating the original challenge or problem.
  • As a consequence of these (and other) factors, cost/schedule overruns and net present value underperformance frequently characterize project outcomes.

While many of the preceding challenges remain today, there has been visible progress over the last decade in managing above-ground risk.

  • Evidence of above-ground risk impacts on commercial value is clearer, both qualitatively and quantitatively [e.g., International Finance Corporation and other cost/benefit estimates of community consultation value in both oil/gas and mining (www.fvtool.com/case-studies)].
  • Technology and communication support company innovation in above-ground risk management and engagement (at the same time, however, communication platforms also “raise the bar” on above-ground risk performance as stakeholders with different perspectives or in opposition to industry developments can connect more readily than ever before).
  • Availability of resources, guidelines, experts, and standards for assessing and managing above-ground risks as they pertain to capital and operating projects has steadily increased.
  • Tools and processes [e.g., decision quality frameworks, multidisciplinary expert teams, assurance protocols [see the Acorn International EHSS Assurance Tool for an example (www.acornintl.net/ehss_assurance.html)] for assessing and integrating above ground risks into project economics and risk management have advanced significantly (though they remain underdeveloped relative to technical issues).
  • Increased pressure on localizing benefits (e.g., local content via jobs, economic multiplier impacts, community investments, and capacity building) is pervasive and has resulted in greater company human resource investments at the local level focused on social and environmental performance.

Fig. 3

Fig. 3 summarizes these trends with specific examples.

These trends have led to more robust management frameworks to identify, mitigate, manage, and monitor above-ground risks and their underlying root causes. A simplified example of such a framework may be found in Fig. 4 (reading from bottom up, starting with impact management and leading to contributions and benefits). For effective risk management, all three of these elements are equally important; one without the other creates unanticipated risks (e.g., failure to effectively mitigate or communicate actual or perceived environmental or social impacts compromises otherwise promising benefit “levers” that might help secure social or legal license to operate; similarly, failure to demonstrate benefits may result in a lack of project support despite strong impact management).


Fig. 4

In years past, it was a commonly held view that planning for above-ground risks was impractical because they were so uncertain or difficult to anticipate. Fortunately, this view has changed substantially, and companies now use frameworks that have been tested in other arenas (e.g., Plan, Do, Check, Act) to manage above-ground risks.  Examples include

  • Scoping and screening tools (Fig. 5) to identify key issues efficiently and early in the life cycle


    Fig. 5

  • Formal social and environmental impact assessments to detail and communicate impacts and benefits, as well as environmental and social management plans to mitigate impacts and enhance benefits
  • Stakeholder/community engagement approaches and strategies that ensure disclosure and communication to mitigate overall risk
  • Tested local content and social investment approaches that establish clear baselines for developing objectives and measuring progress on benefits delivery

Fig. 6

Building on early risk identification and management, the IFC Performance Standards (Fig. 6) have helped oil/gas and mining companies tailor their own management systems through a checklist of recurring extractives-related issue categories, as well as an overall process for identifying, managing, and mitigating these above-ground risk topics.

Other tools, standards, and guidance documents are increasingly available from industry associations such as IPIECA as well as the International Council on Metals and Mining. These toolkits help to formalize the management of above-ground risks in a manner that saves time, effort, and value over the long term. (Fig. 7 is a sample publication from IPIECA on grievance mechanism design and implementation.)

Fig. 7

Fig. 7

In summary, while substantial progress has been made in the identification and management of above-ground risks, the bar continues to rise as key stakeholders, such as host governments, nongovernmental organizations, and local communities, readily connect on perceived/actual project impacts as well as on benefit expectations. The current commodity price downturn and corresponding budget/staff consolidations up the ante even further as local stakeholders see reduced benefits (e.g., lower taxes and royalties and fewer investments in local economy), and companies are left with fewer resources with which to manage above-ground risks.

In 2016, successful above-ground risk management will be fostered by companies that are able to balance these challenges by

  • Dedicating requisite competencies efficiently through technology and multidisciplinary teams
  • Incorporating local knowledge and insights early and regularly
  • Anticipating changes in risk factors throughout different stages of the project life cycle
  • Integrating internal and external best practices and standards into decision making
  • Broadening engagement beyond regulatory requirements to establish early warning and develop key stakeholder relationships

Questions or comments about this article may be emailed to Michael Oxman.

Watch the full presentation here:


14 Jan 2016

Growing Expectations Prompt New Edition of Guidance for Sustainability Reporting

Louise Tyson, Head of Corporate Reporting, BP
Mark Granquist, Corporate Safety, Health, and Environment Reporting and Analysis Advisor, ExxonMobil

This year, IPIECA, the global oil and gas industry association for environmental and social issues; the American Petroleum Institute (API); and the International Association of Oil and Gas Producers (IOGP) released the third edition of the Oil and Gas Industry Guidance on Voluntary Sustainability Reporting. What follows are questions and answer about the new edition, why it was necessary, and what is new in it.

Panel Members

As a result, a cross-company task force was set up and the external stakeholder panel that had been involved with the development of the 2010 edition of the Guidance was re-engaged. After discussion with the panel and input from industry specialists and technical groups in IPIECA, API, and IOGP, it became very clear that the scale of the proposed changes justified undertaking a new edition of the Guidance and not just an update. The outcome was a 2-plus-year effort involving experts from across the IPIECA, API, and IOGP membership, which represent more than 60% of global oil and gas productions.

What were the overall objectives for updating the Guidance?
Primarily, the task force wanted to ensure that the guidance provided to the oil and gas industry was reflecting the most recent international, regional, or national guidelines relevant to reporting. These include the UN Guiding Principles on Business and Human Rights, the Intergovernmental Panel on Climate Change’s fourth and fifth assessment reports on climate-change risks, and the Global Reporting Initiative’s (GRI’s) G4 Guidelines, together with alignment improvements in areas such as fresh water, biodiversity, cultural heritage, facility decommissioning, process safety, and transparency of payments to governments.

The task force also wanted to provide guidance that focused on issues, not just indicators. It could be seen that the industry’s stakeholders were looking for more strategic and forward-looking reporting, as well as more transparency on management systems, impacts, and performance. Significant effort was put into this new aspect of the Guidance, and it will be interesting to see how it affects reporting.

It was important to ensure that companies covered the breadth of issues and effects related to their activities, such as nonconventional energy sources, the supply chain, and other indirect or lifecycle factors. Users will see further guidance on reporting across the value chain in the new edition.

Furthermore, materiality has been a key part of the evolving external standards. Therefore, this Guidance goes into more depth about the process for companies to determine what the issues of the most strategic importance and greatest impact are. More detail has also been provided on how to give these issues appropriate attention and prominence in reporting.

Finally, it was important to keep the same structure as the 2010 edition. This would encourage companies to strengthen their reporting practices and not focus their efforts on responding to ever-changing approaches as has been seen from some of the external frameworks. This continuity also allows stakeholders to follow a company’s progress over time.

What is new about the 2015 Guidance?
The 2015 edition of the Guidance is unique in that it provides both the background building blocks of good process in reporting as well as a set of issues and indicators that can be incorporated by any level of reporter. This reflects the different degrees of experience in sustainability reporting and practice within the industry. The importance of the engagement process for sustainability reporting has been emphasized, encouraging companies to report on those issues most important to their stakeholders.

Changes Summary

The Guidance focuses on 12 broad issues that are likely to be important for oil and gas companies and, therefore, have higher priority in terms of materiality for reporting. In the 2015 edition, water was separated out as an issue in its own right.

In order to encourage consistency of reporting, each issue is provided with guidance and one or more supporting performance indicators. A new indicator was added on decommissioning, and many of the existing indicators were improved.

The Guidance continues to take a three-tiered approach; each indicator has three levels of reporting—common, supplemental, and other—which allow for differences in materiality and reporting maturity for individual companies. With the 2015 edition, several of the indicators were upgraded from “other” to “supplemental” or from “supplemental” to “common.” The opportunity was also taken to further ensure increased alignment of the indicators to international industry standards and expected norms, as well as to issue-specific international guidelines.

What are the benefits of sustainability reporting?
Reporting can bring companies recognizable business benefits. Through communication on its most important sustainability issues, a company’s report becomes a reliable source of information for its stakeholders. By transparently describing its biggest challenges, reporting underpins stakeholder engagement and represents the company’s values in action.

For oil and gas companies, reporting provides a robust platform for describing how strategic issues—such as climate change and energy—are being addressed through long-term plans and current initiatives. For example, the report can explain how the company is managing the social and economic effects or environmental, health, and safety risks of operating in different locations. Once published, this information enables further communication and engagement with stakeholders. In the longer term, the benefits can provide:

  • Enhanced business value as investor confidence grows in response to evidence that the company is managing important risks and positioning itself to take advantage of emerging opportunities
  • Improved operations as employees develop a deeper understanding of a company’s sustainability values and performance indicators provide insight to support continuous improvement
  • Strengthened relationships as local community leaders, civil society representatives, government officials and regulators, and other key stakeholders learn how the company responsibly manages sustainability issues
  • Enhanced trust and credibility as customers, suppliers, and the wider society understand the company’s brand, operations, and products
  • Using an external framework to structure their reporting, such as the industry reporting guidance, or indeed those provided by the Global Reporting Initiative, allows companies to develop reliable, relevant, and comprehensive information to help inform key business decisions and communicate with external stakeholders.

I am a new reporter. How do I get started?
The 2015 Industry Guidance features front sections that set the strategic context for reporting, providing the foundation for good practice through sound principles and describing a six-step reporting process. The Guidance has been specifically developed to offer comprehensive guidance for mature reporters while imparting practical help to those just getting started.

The design of the Guidance encourages new reporters by presenting mechanisms for determining their relevant issues and impacts and then provides scalability on performance indicator reporting by offering various reporting elements depending on the level of company sophistication and maturity of data systems. Companies are encouraged to use a stepwise process for reporting by

  • Setting the context for the report by outlining the company’s high-level vision and strategy together with governance and management systems
  • Determining the most important topics that will have prominence in the report, using the concept of materiality to identify the complete set of issues and impacts of relevance to both the company and its stakeholders
  • Establishing relevant indicators and collecting complete, accurate data within the company’s reporting boundary for incorporation into the narrative

The objective of each step is to build a transparent and concise report as part of stakeholder engagement. The process helps the company to describe its strategic intent, management approach, and current performance on all important issues and impacts while avoiding unnecessary and time-consuming reporting of extraneous text and data, which can obscure relevant information.

Further Information
You can download the Guidance here and can learn more about this emerging domain at the SPE Sustainable Development Technical Section website and at the 2016 SPE International Conference and Exhibition on Health, Safety, Security, Environment, and Social Responsibility in Stavanger, where one of the four sustainability panels will address the topics of reporting and disclosure in relation to sustainability performance.

Please contact the IPIECA Secretariat if you have any questions relating to use of the Guidance.

12 Jan 2016

Sustainability Solutions Central to Operational Risk Management Strategies

Change is constant in the midstream and upstream oil and gas industry, and with change comes an increase in operational risk. As companies acquire and develop assets around the world, they must reduce their risk exposure by improving operational integrity, an expert said.

image002In a webinar, “Increasing Operational Integrity Through Optimal Processes and Systems Integration,” Chelsea Lackey discussed how health, safety, and environment (HSE) planning helps drive an organization’s operational risk management strategy. Lackey is a leader of corporate HSE analytics and systems at Anadarko. The webinar was hosted by the SPE Health, Safety, Security, Environment, and Social Responsibility (HSSE-SR) Study Group.

Lackey divided Anadarko’s approach to operational risk management into three groups: people, process/data, and technology. Each group presents its own set of challenges. Lackey said that, while the company strives to have people engaged in each local community in which it operates, the information and data they need to communicate with their communities are spread across many business units with varying availability. The groups’ roles within the organization, and their responsibilities in using HSE information are unclear, as is the definition of accountability for the data.

She said the processes for capturing, entering, using, and managing HSE data are informal and inconsistent and that the hierarchies and master data sources are inconsistent. One way to improve these processes is to standardize the terminology that companies use in interdepartmental communications. Lackey said the confusion caused by using interchangeable terms can dilute a company’s message, citing an example of an information technology (IT) employee and an HSE employee using the word “report” in different contexts within a conversation.

“The IT person is overhearing queries and thinking they’re building some database, and the HSE person’s thinking about some regulatory framework. They’re using the exact same word, but what they never picked up on in the conversation is that it had two different meanings, and they never got to an end result. We need to standardize language, make it transparent, and ensure and validate that the other person is truly on the same playing field,” Lackey said.

Technological developments also may face a consistency problem. Lackey said information systems are poorly leveraged across regions and both the acquisitions of software for compiling HSE data and the requests made by HSE groups are disjointed. Companies must account for the hidden costs of managing new technology.

She said that technology is only as useful as the processes a company develops to utilize it and that it is important for new technology to help companies acquire HSE data and understand the trends in the data.

“You can have the best technology, but if no one uses it, or if it’s too complicated for the end user, the technology just sits there,” Lackey said. “So how do we, as an organization, bridge that? We have geologists. We have scientists. We have engineers. We are an industry that thrives on technology. But now we have to take that technology and turn it into value.”

Lackey said a primary goal for any company’s operational risk management strategy is to develop a central enterprise resource planning (ERP) system that incorporates operational data. The system should allow for flexible data reporting so that any department can use it for its needs.

Anadarko’s proposed ERP system would use data and analytics reporting to connect its worldwide business to its accounting, asset management, human capital management, procurement, HSE, and regulatory systems. However, Lackey said each company should tailor its system design to its specific needs.

“The frame of the question changes the deliverable, so understanding the demands of your organization and the different ways in which you need to see your data establishes that framework to get it into a central system,” she said.

7 Jan 2016

Training, Procedures Essential to Cybersecurity Efforts

More than 45% of energy organizations fell victim to a cyberattack in 2014, a higher percentage than in any other corporate sector. With the industry facing constant hacking threats, companies must place a greater emphasis on developing strong cybersecurity strategies, an expert said.

In a presentation, “The Rising Threat—Guarding Against the New Generation of Cyberattacks,” hosted by the SPE Gulf Coast Section, Mario Chiock discussed the key elements of cybersecurity and outlined steps companies can take to reduce potential exposure to cyberattacks. Chiock is a security and technology executive adviser at Schlumberger.

Chiock said a major problem energy companies face is a lack of fragmentation in their enterprise resource planning (ERP) systems. Most ERP systems are connected either to a cloud computing network or mobile devices, leaving significant holes in their firewalls.

With no fragmentation, hackers can access an entire network through one outlet, and oftentimes that outlet is a phishing email. Most major cyberattacks begin with a hacker phishing employees for information such as logins and passwords. Chiock said Schlumberger regularly sends phishing emails to its employees to help raise awareness of the issue. However, even the most diligent companies can have their networks compromised by a single successful phishing attempt.

“All it really takes is one person clicking on something to start an attack,” Chiock said. “[At Schlumberger], we phish our employees once per quarter, and sometimes we think we’re going in the right direction. But all we have to do is change the phishing email and then [the number of breaches] go up again.”

Cloud infrastructures offer benefits and disadvantages. Chiock said storing data in the cloud is safer for companies than storing data on their own servers, but the risk for a security breach is higher because the servers are hosted to the Internet. An additional concern with companies looking to migrate to a cloud infrastructure is that they will likely assume financial responsibility for any data lost on its servers in a breach. Most cloud providers, he said, are only responsible for protecting their own servers and not that of their clients.

“When you do things in the cloud, the people who sell you cloud services will promise you everything. They’ll tell you that they’re going to be responsible for handling security. In reality, they’re responsible for the security of their infrastructure and their data, not for the infrastructure of your application,” Chiock said.

Combating cyberthreats is not just a matter of finding a technological solution. Chiock said it is important to promote a culture of responsibility and accountability. Employee training is one step in promoting such a culture, as is the development of policies and standards that can be audited, enforced, and measured. Additionally, companies must constantly update their cybersecurity policies to account for new threats.

“We cannot just have policies and standards that are 10 years old and expect them to protect us today. There is a lot of new technology that opens up holes into our networks, and we need to make sure our policies get updated to protect us,” Chiock said.

While the establishment of proper policies and procedures is important, technology should still play a significant role in cybersecurity. Chiock suggested that companies acquire next-generation security software and automate its protocol in handling cyberattacks. He said hackers will often target companies after hours and a quick response is critical.

“When you start getting information intel, if it needs to go to a human and that human needs to make a decision, by that point it’s too late. We cannot do that anymore. If there is [intelligence] in the middle of the night, I want it fixed by the time I wake up. All it takes is a little window of opportunity for the bad guys to get in,” Chiock said.

Machine learning, or the development of computer programs that can teach themselves to adapt to new data, is a strategy that has already taken hold in the technology industry. Chiock said Schlumberger develops such programs to help detect false positives in its security systems. But, he said, the technology is still not mature enough to use as the basis of a security strategy.

“I think [machine learning] is the future, but I’m also a big believer that there is no silver bullet that fixes everything. You have to create a strategy, and, based on your strategy and your needs, you have to use multiple tools and technologies to resolve specific issues,” Chiock said.