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Step in before the disaster risks flare up…

Venkatesh Kulkarni | Updated on March 03, 2013

There are immense challenges in the area of disaster management for the oil and gas sector, given the global scale of operations and complexities.

The significance of disaster management in the oil and gas industry is growing as disasters, natural and man-made, are on the rise, often resulting in considerable damage to the environment and the associated community. Business Continuity Management Systems (BCMS) are meant to minimise the impact of disasters, and manage post-disaster recovery.

Natural calamities such as flood, hurricane, and cyclone, as also man-made disasters can result in loss of life, billions of dollars’ cost in potential lawsuits and cleanup damages, disruption in operations, loss of shareholder value, and so on. In recent times, there is focus on strengthening the information technology landscape to minimise disruption after a disaster, as there is growing dependence on IT solutions such as digital oilfield for upstream operations, Supervisory Control and Data Acquisition (SCADA) solutions for refinery and pipeline operations, and Industrial Control Systems (ICS).

The Gulf of Mexico oil spill in 2010 was one of the largest man-made disasters in the industry — spewing 4 million barrels of oil, killing 11 people, and payouts of billions of dollars in loss settlements. In 2005, hurricanes Katrina and Rita destroyed 113 oil platforms, damaged around 53 others, and impacted nine refineries. Meanwhile, in a major breach of IT security, a major West Asian oil producer reported a malware attack on 30,000 computers. Although the core exploration and production activities were not impacted, the company was forced to temporarily suspend corporate remote access services.

Given the significant risks involved in the oil and gas value chain, companies should necessarily devise disaster management solutions that generate awareness among all stakeholders, minimise downtime, and ensure business continuity.

The Government has drafted disaster management regulations such as the National Disaster Management Act 2005, MSIHC (manufacture, storage and import of hazardous chemicals) Rules 1989, EPPR (emergency planning, preparedness and response) Rules 1996, PLI (public liability) Act 1991, besides Factories Act 1948 (amended thereafter). The Government, local authorities, and companies should collaborate on an effective disaster management programme for onsite and offsite needs. This would encompass four broad steps: disaster avoidance, preparedness, mitigation, and post-disaster.

Companies should undertake an exercise to foresee and assess key internal and external issues. A Hazard Identification and Risk Assessment program can be effective in analysing operational risks. Certifications such as OHSAS 18001 (occupational health and safety management systems), ISO 14001 (environmental management systems), ISO 9001 (quality management systems), ISO 22301 (business continuity management systems), and ISO 31000 (enterprise risk management) can help lay the foundation for disaster avoidance and preparedness. The four-step PDCA (plan, do, check, act) cyclical improvement process can assist in early detection and response, resulting in continuous improvement.

Training programmes are needed for emergency response personnel in the use of appropriate protection equipment, preventive maintenance, evacuation procedures, use of fire extinguishers and so on. Regular drills can assist in identifying bottlenecks, rectifying defects and minimising emergency response time. The design and use of an appropriate detection system can also aid early identification of hazardous leaks.

During an emergency, efficient evacuation systems, co-ordination amongst key personnel and prompt medical response are important. Rehabilitation programme, documentation of events and sharing of key lessons learnt from a disaster are significant aspects of post-disaster procedures. Additionally, given the growing dependence on specialised IT solutions, it is important to secure proprietary data and limit the impact of accidents on data operations to ensure business continuity. Organisations should also step up investment in disaster recovery planning for IT, to aid post-disaster resumption and recovery of operations.

There are immense challenges in the area of disaster management for the oil and gas sector, given the global scale of operations and complexities. In addition, the availability of critical data, rapidly evolving technological developments, and financial, regulatory and legal risks call for enhanced disaster responsiveness.

Venkatesh Kulkarni is Associate Director-Advisory Services, Ernst & Young

Published on March 03, 2013

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