Reasons for Extending the Life of Ageing Assets
Many oil and gas installations in UK’s North Sea oil reserves have remained in operation beyond operation life. Operation of ageing installation presents numerous challenges to health and safety of both staffs and environment. The need to extend the life of ageing assets is subject to provisions of guidelines developed by Health and Safety Executive (HSE). The phenomenon has lead to enactment legislation and standards that assist in installation and maintenance of various assets in the North Sea. Some of the reasons for extended life of assets include decommissioning cost, the time it takes to decommission assets and the cost to dismantle the ageing assets. Statistics show the cost of maintaining ageing assets and cost attributed to both accidents and repairs of these assets. The following report provides analysis of Ageing and Life Extension issues in the oil and gas reserves of UK’s North Sea (Rademaeker et al 2014, pp 280-291).
2.1 Business case for extending the life of ageing installations in the North Sea
There are very many reasons for extending the life ageing installations in companies involved oil production in the North Sea. Firstly, collapse in the regional oil price has caused many companies to re-evaluate the economic viability of changing ageing installations. The problem of oil prices is also making oil unprofitable in the contemporary market especially for those small companies operating within these regions. In addition, Years of higher-than-break-even oil prices are causing companies to implement ageing installations strategies. These changes in oil prices have also caused job losses leading to approximately 124000 unemployment in the sector (HSE 2002, pp 028).
Secondly, the scale of the job to replace the ageing installations is challenging since the number of installations is more than1357 offshore installations in OSPAR maritime area. It is estimated that 545 of these installations are fixed steel. More than 80% of these offshore installations according to HSE IS9 (2004), should be out of service due to ageing by 2030. The overall cost of replacing or decommissioning of ageing installations is estimated to exceed £47 billion. The operation life is expected to go beyond this field life since the complexity of handling these installations present the primary challenge (Milazzo & Aven 2012, pp 183-192).
Thirdly, decommissioning of ageing installations in the North Sea presents over time and over budget. Though ageing installation present health and safety challenge the decommissioning of these installations takes overtime of up to 30 years. For instance, decommissioning of some installations in the North Sea that were supposed to cost 10-15% of the construction budget exceeded the cost by 40% of the budget. The length the time that decommissioning of ageing installation takes has proved that the task involves is much more than the estimated time frame (HSE 2008, no.044).
Challenges in Replacing Ageing Installations
Thirdly, replacing ageing installations is quite challenging for smaller companies operating within the region. Replacing ageing installations cause collapse of more than 100 companies in the United States of America. The cost of replacing and decommissioning ageing installations that are also coupled with the high expert requirement is quite tricky for young struggling companies. For instance, Tuscan Energy in 2005 was saved from the cost to required decommission companies within UKCS and NCS due to its insolvency. Moreover, the cost of new installation must also factor the labor and expertise required for dismantling those ageing installation in the sea (HSE 2006, no.509).
Finally, some young companies operating in the North Sea has limited resources and this present challenges in facing out the ageing installation. The central argument is the unchartered work presented by decommissioning of ageing installation making operation life of this installation to go for many years. In addition, these young companies that are on the verge of being wiped out by large companies have a limited budget for decommissioning ageing installations (Zuccarelli et al 1991, pp 43-48).
2.2 Risk management and Asset integrity of North Sea installations
One of the trickiest aspects of the North Sea installations involves risk management and assets integrity. As a health and safety practitioner ageing installations are risky to both life and environment due to continued deterioration and loss of integrity. Studies indicate that blast walls connection are currently worn out and without replacement, the integrity of asset is compromised. Assets integrity of the North Sea installations requires high-risk management assess and ensure there are risk mitigation guidelines as provided by Health Safety Executive (HSE) (HSE 2002, pp 028).
Focusing on the assets integrity management is important for is key to monitoring and evaluation of risk or asset integrity. Some of the health and safety concerns include time-dependent mechanisms, damage or deterioration with time and external changes with time. Firstly, the time-dependent mechanism includes the fact that most assets have a specific lifespan beyond which metallic parts are corroded, and creep for non-metallic parts. Ageing installations become health and safety concern when the assets are past the expected lifespan. Secondly, damage and deterioration is another health and safety concern due to environmental overload and accidental damage. With time various assets become subject to risk due to damage posing risk to operators and the public in general. Thirdly, external changes that occur over time include failures to upgrade assets according to current technologies and risk management strategies (Horrocks et al 2010).
Risk Management and Asset Integrity
There are some risk management strategies that are grounded in both legal provisions and technical capabilities. Some of the mechanisms to tackle the ageing risk include regulatory provisions, safety management system, risk assessment and stakeholders’ engagement. Firstly, there are many different UK regulatory provisions that take care of the ageing and life extension installations. Some of these include DCR (1996), PFEER (1995), PUWER (1998), SCR (2005) and MHSWA (2003). These regulatory provisions offer the entire requirement for an extension beyond the life of various assets in UK oil and gas production especially on North Sea (Sharp, Stacey & Birkenshaw 2001). Secondly, safety management system provides various activities that involved in management and assessment of ageing or asset integrity. For instance, safety management system gives various technical policy and strategies to review safety standards of ageing assets. Thirdly, another risk management mechanism involves risk assessment guidelines as provided by Health Safety Executive (HSE) for assets managers. Finally, various stakeholders are involved in risk management through provision of training, seminaries and safety meeting to deliberate on safety procedures involved in the maintenance of ageing assets (UNI/TS 11325-8 2013).
2.3 Developments in knowledge and/or technology advancement
Development in knowledge and advancement in technology is one of the reasons for the loss in the usefulness of many assets. Changes in knowledge, technology, and standards of assets management indicate that most of the assets are currently operating beyond the original field life. This is very challenging for the health and safety gave the dangers that this ageing installation poses to life and the environment. Development in knowledge and technology advancement provides the basis for both extending filed life and development of new technologies in oil and gas field (Chockie & Gregor 2006, no.23).
Changes in engineering standard are one of the challenges that result from development in knowledge and advancement in technology. Engineering standards provide a requirement for replacing assets parts and various components of ageing infrastructure in the North Sea. Firstly, increase in age and deteriorating assets condition makes it difficult to replace ageing installations (Sharp, Stacey & Birkenshaw 2002, no 28610). The ageing installations compromise the steel integrity making it difficult to extend the life of the installation in the oil and gas production as this also contradicts the engineering standards. Secondly, increasing dependant on the existing technologies for the development of other installations making it challenges to replace these systems. This implies that development of the technologies used in oil and gas production also depends on the ageing installations for development of new ones. This also compromises the integrity of these installations that have been used past field life. Thirdly, development in knowledge should improve the quality of inspection and analysis of those ageing materials that necessitate life extension. In addition, development of knowledge should provide early indicators for ageing and obsolescence of these assets (ARIA Database Eds 2006, pp 112-127).
Regulatory Provisions Governing Ageing Assets
2.4 Changes in the organization and skills/knowledge
There are various changes in the organization that influence the extension of the life of ageing installation in the North Sea. Changes in the organization are mostly influenced by financial or economic reasons. Some of the most common change within the organization is reducing the number of staff, reorganizing departments and teams or adopting ‘flexible working’ (Zuccarelli et al 1991, pp 43-48).
Reducing the number of staffs is one of the common changes that highly play a significant role in the integrity of assets. Firstly, reducing the number of staffs compromises the knowledge as experts are laid off leading to low maintenance and risk management. Reducing the number of staffs means high workload for the remaining staffs and this is risky for risk assessment and inspections. Health and safety executive have also raised concerns due to limited safety conditions that result from a low number of employees and experts in some companies within the North Sea. Secondly, reducing the number of staffs also influences the knowledge changes since some specialized staffs are leaving the company. Maintenance of assets also depends on the knowledge from staffs and a low number of staffs present challenges to maintenance (Horrocks et al 2010).
Reorganizing departments is another change that normally occurs within an organization that has affected the assets with oil and gas production. Changes in organization management have potential risk and maintenance of assets. For instance, US refinery in February 1999 killed four workers and injured many yet the audits revealed that the explosion resulted from poor maintenance due to organization changes (International Atomic Energy Agency 2009). Reorganization of the department within an organization is the chief source of communication breakdown that limits knowledge and skills to maintain assets. The guidelines for effecting changes in organization and reorganizations of department require proper safety measures and prior communication for integrity maintenance. Moreover, reorganizing teams also is a precursor to skills loss since skilled staffs are transferred to other areas not originally intended (Fanning 2003).
Adopting flexible operational and maintenance working is another organizational and knowledge change that is also affecting most companies that may result in poor ageing and life extension of assets. Sometimes the management effect changes in the bead to adopt a more flexible operational and management structure that is more compromised than the existing one. This is coupled with poor safety measures when maintaining assets. In contrast, safety operational changes can also help improve challenges that have been experienced by these companies when running maintenance operations. Adopting a more flexible operational and maintenance working can help improve risk assessment and management procedures (Bragatto, Della & Faragnoli 2012, pp 177-182).
Development in Knowledge and Technology
Companies have developed the risk management strategies that are adapted to help prevent loss of skills, knowledge, and safety in case of organization changes. Firstly, proper communication of changes to staffs before effecting these changes in the organization. Secondly, consulting properly enough with staffs involved in changes to ensure that there is no breakdown in operational working that compromises safety. Thirdly, understanding and evaluating the risks associated with changes before implementing those proposed changes. Understanding risk helps the company to consider all the risk mitigation options and act responsibly (API 580 2009, pp 280).
2.5 Statistics relating to ALE (Ageing and Life Extension) for example from the HSE, Oil and Gas UK
Ageing statistics indicate that there are many installations that are beyond their original operation life. For instance, the ageing study carried out by HSE indicates that more than 50% of the current installations found in the North Sea have exceeded the original 25 years operation life. This poses a high risk since it is estimated that the ageing and risk associated with ageing begins immediately the assets enter the sea. Moreover, the more these installations continue to offers services to the companies, the ageing installation becomes and the number of older systems increases with time (Chockie & Gregor 2006, no.23).
Safety statistics by HSE indicates there are many accidents and illness associated with working in ageing installations. Firstly, more than 36 injuries were reported during 2011/12 as compared the previous years of 41 injuries. This number is derived from 29,058 offshore workers in 2011/12 when compared to 27,600 workers in the previous year. In addition, the fatal rate includes 130.77 per 100,000 workers as compared to 51.84 in the previous year. Injuries are due to accidents such as fall that represent 17 in number, hit by moving object represent 7 of the number and handling of load account for 7 which is 86% of the total injuries. Limbs injuries account for 64% of the total injuries translating to 24 injuries (Wintle, Moore, Smalley & Amphlett 2006).
Economic statistics show a high cost of maintenance and repair of these ageing installations. Economic statistics can be grouped into the cost of corrosion, loss of life and injuries, cost of maintenance. Firstly, corrosion and repairs for assets in the North Sea have cost companies within UK huge sum of money. For instance, in 2002 NACE cost of corrosion study indicate that more than 3.1% of GDP translated to $1.4 Billion annually goes to corrosion-related repairs. Secondly, loss of life and subsequent injuries that are estimated at 11 deaths and more than 180 injuries accounted for the loss of €170Million. More than 425 occurrences are reportedly dangerous to life result from the release of hydrocarbons due to corrosion. Of these occurrences, 30% are due to equipment failures, hydrocarbon releases account for 29.9%, well-related incidents account for 10.1 % and fire offshore 6.8 % (Gyenes & Heraty 2016, pp 733-738).
Changes in the Organization
2.6 Legislation relating to ALE (Ageing and Life Extension) in the North Sea – Health and Safety Executive/Energy Division (HSE ED)
Legislations have been developed by Health and Safety Executive/Energy Division (HSE ED) to help monitor, regulate and protect key players with ageing installations. These legislations also protect the integrity of ageing installation against any risk such as leak or explosion. These regulations can be grouped into safety regulations, maintenance regulations, life cycle regulations, and organizational regulations.
Safety regulations include all standards set to address health and safety concerns before installation of these assets in the North Sea. There are various regulations that provide standards such as SCR (2005) which offers various safety standards to be fulfilled before any installation. The legislation further gives safety standards during installation to avoid any future risk associated. In addition, SCR (2005) also provides and foresee the ageing life extension for these installations before they are put in place. Another safety regulation includes PFEER (1995) that provides safety measures required in designing, detecting, protective and control measures for these ageing installations and possible life extension (Bragatto et al, 2015, pp 271-276).
Maintenance regulations include those health and safety procedures set for operational maintenance of ageing installation including life extension. An example of these regulations or legislations includes DCR (1996) that provides the health and safety measures concerned with periodic maintenance, performance standards and Independent verification by ICP (Flage & Aven 2009, pp 9-18). Firstly, UK regulation under legislation DCR (1996) gives direction on the maintenance that is required for those companies that are operating offshore oil and gas installations in the North Sea. Secondly, this legislation also provides the basis of performance standards used to assess the ageing installation under risk management guidelines. Thirdly, DCR (1996) provides grounds for independent verification by ICP as an aspect of maintenance management process that also ensures that companies only work according to requirement. PUWER (1998) is another regulation that also provides various standards that are used in the maintenance of hazardous equipment and the necessary inspections (Cutts 2005).
Life cycle regulations include those technical policies and guidelines that are required to assess and review the life cycle of all assets. PSR (1996) is a good example of those legislations that provides the requirement for life extension beyond the set life cycle. This legislation is concerned with the maintenance of pipelines in a state that can continue to work beyond the ageing field life. The legislation also set standards involved in inspection and evaluation of the risk that may result in the short life cycle for those installations expected to last for longer period of time beyond field life (Herbert 2001, pp34–80).
Some other regulations and legislation provide policies and guidelines for organization, planning and performance reviews. For instance, HSWA (1974) / MHSWA (2003) that gives the basis of incorporating modern codes and organization policies to ensure good maintenance of these systems. Modern codes and standards offer the foundations that are used to upgrade or maintain various components of offshore installations. Organizational changes have a direct influence on maintenance and operations aimed at repairs of offshore installations. The legislation provides a requirement that helps facilitate organizational planning and policies that are also used in inspection of these installations. Furthermore, this legislation contains guidelines and procedures required in review and audit of various aspects of offshore installations (Ersdal & Langen 2002, pp 4276-433).
Despite all the necessary precautions and measures put in place to guide the installation and maintenance of ageing installations in the North Sea, health and safety of operation are challenging. As health and safety practitioner, most of the ageing installation consider economic and financial of the company and staffs and this compromises environmental and human health (Chockie & Gregor 2006). Explosions that may result from ageing and corroded assets are fatal to human life and very disastrous to the environment. Secondly, life extension of ageing assets offers high maintenance cost to ensure minimal risk associated with these installations. Ageing installations pose a high risk as compared to the risk mitigation procedures put in place. Thirdly, assets integrity reduces the ageing of installation making maintenance difficult and risky for personnel involved. Though the primary concern of HSE is the integrity of assets, ageing installations and life extension make assets have low integrity. Without serious consideration of the danger posed by ageing assets, injuries and death are most likely to increase given that more than 50% of assets in the North Sea are past operation life (Catterson et al 2013, pp 271-276).
4. Conclusion
In conclusion, Ageing and Life Extension (ALE) of oil and gas assets in the North Sea is a phenomenon that has helped much old oil and gas installation continuo beyond operation life. Business factors and technological factors are the main reason for extending the life of many assets in the North Sea. Organization change and policies are the core of life extension of ageing installation without compromising assets integrity. There is a legal backup that facilitates installation, maintenance and decommissioning of oil assets. In addition, statistics give the economic implication of accidents and maintenance of these ageing installations. Development of knowledge and skills or technology is another factor that facilitates ageing and extension of the life of North Sea oil installation. Despite all safety measures instituted by HSE, ageing installations pose high human and environmental risk.
5. References
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