The Weekly Reflektion 26/2022

The Petroleum Safety Authority (PSA) main issue for 2022 is ‘Capacity and Competence – the key to safety’. PSA emphasizes the importance of an organization possessing the right capacity and competence. However, possessing is not enough. Your competence must be utilized properly to ensure you fulfill your responsibilities.

Are you fulfilling your ‘see to it’ duty?

The Norwegian petroleum industry has undergone significant changes in the last few years. Major companies, for example, Exxon Mobil, Norske Shell, BP, have sold out or reduced their share in producing fields where they were operator and, in some other fields, where they were a licence partner. New companies have been established that have taken on the operator role and smaller, leaner companies have bought into licenses and become partners.

The Norwegian system for the exploitation of hydrocarbon resources is based on the ‘Petroleum Act November 1995 No. 72 relating to petroleum activities’. Licenses for exploitation of hydrocarbon resources are awarded by the Norwegian government and an operator is appointed to manage the licences and ensure all activities are carried out in a prudent manner and in accordance with the relevant laws and regulations. In the Petroleum Act there is also a ‘see to it’ duty for the licence partners. This covers specifically, emergency preparedness, qualifications for people engaged in the petroleum activities, compliance, and expectations to the board of directors. The main intention of the ’see to it’ duty for the licence partners is to ensure that the operator is fulfilling its responsibilities on prudent operation and compliance with laws and regulations. 

The PSA main theme on competence and capacity is a timely reminder to the industry of the current challenges with getting the right people. The tax concessions made to stimulate the industry during the COVID pandemic, and the current high oil and gas prices have stimulated a rush of projects for approval in 2022 and these are likely to put further pressure on available resources. When the resources available do not stretch to cover the requirements then companies prioritise. Prioritisation is determined by many factors and not least the performance objectives that the companies have set for themselves. One of the challenges is the balance between intentions and numbers. For example, we will ensure the highest level of safety and comply with the regulations, we will deliver USD 100 million profit. 

Facilities in the late life phase have many technical, operational, and organisational challenges. Ensuring a cost focus to extend the economic lifetime must be balanced against degradation and aging processes and the assurance of technical integrity that is the foundation of prudent operations. The remaining value of the fields is often low especially considering the cost of impending decommissioning. How do licence partners fulfil their ‘see to it duty’ related to late life facilities? The low value may lead some licence partners to prioritise their resources on more valuable assets. The complexity of late life operation may be too challenging for the smaller licence partners. These p become totally reliant on the operator and are effectively crossing their fingers that everything is OK. While the operators should have the necessary competence and capacity to manage the late life facilities this is not the way the system should work. The licence partner ‘see to it’ duty is an important barrier in the petroleum industry and should not be weakened by prioritisation.

Reflekt AS