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The demand for energy is on a continuous rise and with the emergence of countries like China and India (with a great appetite for energy), this demand is only going to increase at least in the foreseeable future. This is good news for the oil and gas industry and its entire stake holders. However, this increased demand for energy also brings an increased pressure to find more oil fields and therefore, increase production. and many companies realise that there is a lot of money to be made.
In this environment Many companies, realising that there is a lot of money to be made due to increase in demand, have thrown caution into the wind focusing more on exploration and production without integrating a proper HSE scheme into their operational mechanism. Some have paid a heavy price for such mistakes while others are yet to learn.
This report will show why it is important for small and medium scale companies to have a sound HSE policy that is intertwined with their operational values and how such a scheme will boost the income, productivity and staff morale of the company.
This case study report is aimed at promoting good Health, Safety and Environment (HSE) values within the small to medium scale Oil Company. HSE contributes to the financial stability of the company and the country in general by increasing the company's global image, employee morale and improved productivity over a long period of time. The need to provide evidence on the benefit of good HSE practice has become a necessity that would enable other small to medium business scale companies, especially in Nigeria, to plan and implement new and improved values that will benefit the businesses of their various companies. An insight into the benefits of improved and effective HSE management in the working environment will be discussed and evaluated.
This case study material will look into;
Raising Awareness on how the management of good HSE practices can benefit many small to medium scale oil companies in terms of productivity, reduced health risks and hospital costs, improved financial stability etc.
Providing evidence of the benefits of reviewing and implementing new and improved HSE policies to small and medium scaled oil companies.
The relevance of good HSE practices are often ignored or put aside by most companies especially the small to medium scale companies due to the anticipated cost of implementation without taking into cognisance that preventive measures are much cheaper than cost of accident management. It is therefore necessary that such companies are convinced of the importance and benefits of good HSE practice and start implementing them.
1.2 AIMS AND SCOPE OF THIS REPORT
This report is aimed at generating a case study that highlights the benefits associated with many Health, Safety and environment practices and improved policies and tools to the small and medium scaled oil companies. This work is focused on the small to medium scaled oil companies; companies that are defined by the medium number of employees and quantity of operations they handle and limited financial capability.
The objectives of researching and collecting data for the case study was to understand the issues concerning the companies and to present a study to persuade and positively influence small to medium sized oil companies on the benefits of a good HSE practice, and to analyse the effect of health, safety and environment in relation to medium and small scale companies.
A case study of Stinger oil and Gas(SOG) servicing Company located in the Niger-Delta region of Nigeria will be used in this report. The Stinger Oil and Gas Company is a servicing company that deals with wellheads and valves servicing, production monitoring and testing and facilities upgrade and installation. Founded only a few years ago, SOG employs over 300 people in Nigeria and its aim is to grow to become one of the leading servicing company locally in Nigeria, and the world. It implemented a good policy to ensure the practice and achievement of planned HSE practices.
The company gives a high priority to Health, Safety and Environment due to the fact that the oil and Gas industry is highly injury prone. Its products, if not well managed, could result in huge losses including loss of life, equipment and finance. The managing director of Stinger oil and gas reviewed the company's health and safety policies and found out that although risk assessment was carried out for the production of valves, it was lacking in storage and transportation of these products.
The first process is to improve the safety culture within the company by applying a zero tolerance to unsafe practices. The new HSE policy implementation was achieved by using friendly procedures and record keeping system. The managers are required to achieve this on-going improvements by maintaining good operating practices which includes
A planned approach to risk management.
A tracking and recording system to track the performances and progress of the policy.
Providing support and encouragement.
Providing high standards and frequent training for continuous improvement and growth.
An incentive scheme that included awards for zero accidents was developed.
A clear and precise role was assigned to each employee which enabled them to be accountable for their safety and that of the company in general.
Included in the HSE policy was a security and community affairs policy which was aimed at combating the increasing security challenges and violent outbreak that was persistent in the region. They achieved this by relating cordially with the host community, employing the locals for labour, and ensured that the Heads of the community were well informed of all activities to be carried out by the company.
FACTORS CONSIDERED FOR THE IMPLEMENTATION OF THE NEW HSE POLICY
As with all cases involving the implementation of new ideas, there were driving factors that sped up the decision making process. These factors include;
2.1.1 Direct cost:
This includes cost that arises from the disaster directly, the oil reserve being wasted as a result of the incident, loss of life, equipment, and the damage to the ecological system. The amount spent in compensation and clean-up is usually higher than the amount required to implement a Good HSE policy in the first place. The Wall Street Journal reported that "Shell faces up to $5 Billion in fines from the Nigerian government after having an offshore spill of about 40,000 barrels of crude. This cost was considered by the management and decisions were made accordingly."
2.1.2 Loss of public confidence:
The occurrence of accidents such as oil spills in Nigeria does not necessarily affect only the company but also the general population in the locality of the company's operations. The more the general public is affected negatively by the company's operations, the more the confidence and trust of the community on the company to improve their lives deteriorates which may lead to riots and violent attacks on the company as seen in the present day Niger delta region.
2.1.3 Loss of business opportunities/ Reputation:
Reputation of the company would be affected negatively hence reducing its productivity, the opportunity to be contracted for future jobs could be affected by poor or no HSE plans, hence there would be a great decrease in the company's financial status and productivity rate. The effects and damages to a small company could also affect a large company that are contracting or doing business with them.
The security of the workers and that of the company is threatened after any major incident in the sense that the communities would be distraught over the loss of basic amenities and in turn would want to retaliate on the company.
This factor was considered and extensively discussed which affected the initiation of the policy.
2.2 BENEFITS OF IMPLEMENTATING THE HSE POLICY
In recent times, organizations are not allowed to ignore the impact of their activities to the environment. For example, "Chevron paid the sum of $17.3 million in connection with the November 2011 spill off the coast of Rio de Janeiro." They lost a lot of money due to this incident which highlights the magnitude of the risk facing oil and gas companies.
With strict adherence to the improved Health Safety and Environment policy, the company was able to achieve:
Reduction in employee accidents and cost of hospital visits and injury or death compensations.
Improved productivity largely due to the availability of manpower and community support.
The Stinger Oil and Gas Company's HSE department was boosted by the increased confidence level placed on the company by clients as they demonstrated seriousness in achieving high levels of health and safety targets. This was reflected in percentage rise of new clients and contractors.
There was minimal report of environmental pollution recorded in the few months after implementation of the policy.
(thousand man-hours completed by employees)
Lost time injury frequency rate
(per 200,000 man-hours)
Recordable incident frequency rate
(per 200,000 man-hours)
Table 1.0 source: petrofac.com
From the above table it is visible that there has been a tremendous increase in the productivity of the company. In 2007, a new HSE policy was implemented and it resulted in a huge increase in the total man - hours completed by employees and sub contractors. The accident frequency rate and recordable incident frequency rate decreased gradually from 2007 to 2011 due to the implementation and strict adherence of the new HSE policy and probably due to improvement in employee HSE trainings.
This report has highlighted the importance of implementing a sound HSE scheme by small and medium scale (Stinger) oil and gas companies. It has looked at the different steps that can help a company achieve this, from the report it is obvious that a company's attitude towards HSE much be positive if they are to accomplish the goal of having a good HSE regime.
The reports also highlights the benefits of having a good HSE scheme in place, it can help increase income through better productivity and better reputation. The process of oil and gas exploration and production can be very dangerous and many companies prefer to deal with companies with a good HSE record. Other benefits includes the fact that a good HSE policy means that accidents that lead to environmental damages are less likely saving the company from paying fines, compensation and lawsuit bills.