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Managing ageing assets: Lessons from the offshore oil and gas industry

Ageing infrastructure and equipment increases the risk of accidents and incidents occurring in all industries however, the risks associated with the offshore oil and gas industry are often greater because of ageing platforms and the nature of the industry’s activities. We look at how you can reduce your risks and your costs by actively managing ageing assets within this industry and beyond.

Whilst everybody within the offshore oil and gas industry is aware of the need to manage ageing plant and equipment, not least because of the Health and Safety Executive’s (HSE) Ageing and Life Extension Key Programme, the principles of managing ageing assets are applicable across the board, both within the wider oil and gas industry and beyond. Proactively managing your asset portfolio can help to avoid the considerable costs associated with a catastrophic failure and it may also save you considerable investment in the future.

Ageing and Life Extension Key Programme

HSE’s Energy Division carried out the Ageing and Life Extension Key Programme, also referred to as KP4, in relation to the risks associated with ageing plant in the offshore oil and gas industry.

Between 2011 and 2013, HSE conducted a number of offshore and onshore inspections to determine the extent to which asset integrity risks associated with ageing and life extension were being managed. They found a range of areas where ageing and life extension management is developing well; they also identified areas where extra focus is required.

Ageing infrastructure

It may come as a surprise to those who work outside of the industry that many of the fixed platforms on the UK’s Continental Shelf are approaching or operating beyond their original life expectancy. Consequently, these platforms are more heavily dependent on both planned and preventative maintenance regimes. As an asset ages and its condition deteriorates, the likelihood of failure increases and we can all imagine the impact that a catastrophic failure in a fundamental piece of equipment could have.

Be prepared

Tackling the issues raised by ageing assets can cause some people to want to bury their heads in the sand, but preparation for life extension or replacement needs to be started early. Early action will help to minimise business disruption and allow time for decisions to be made. You must not allow ageing assets to become hazardous or neglected and the best way to prevent this is to have a continuing programme of risk assessment of all safety critical elements which will enable you to establish a comprehensive maintenance regime.

HSE’s KP4 report found that more effort is required now, for example, monitoring degradation, to anticipate and prevent future unsafe events. In challenging economic times it can be tempting to wait until equipment has broken or worn out before replacing it however, this is often a false economy. By having a sensible planned maintenance programme in place, you can keep your assets running in good condition and maximise their life expectancy. Planned maintenance regimes give you time to anticipate repairs and replacements so that you can budget for them and schedule shutdowns at more convenient times. Many of us have faced the costs of an emergency plumber or electrician and noticed how emergency call-out costs are often far greater than advanced bookings. 

The more comprehensive your planned maintenance programme is, the lower the risk of an accident resulting from failed plant or equipment is. In the event such an accident does occur, you will be more able to support an argument that the risk was unforeseeable and that you took all reasonably practicable steps to manage the risk if you can produce a well drafted maintenance policy. 

Making decisions

Assets need to be suitable and safe at all times and so it is crucial that you adequately invest in maintenance and replacement. Those making key decisions need to have enough information so that they can make informed choices. For example, senior management need to be able to access information about the lifespan of assets so that they can factor this in when determining the business’s short and long terms plans. Everybody needs to be engaged in managing ageing assets and concerns need to be escalated promptly. Good communication between the relevant departments will mean that the necessary people know about the condition of assets, maintenance requirements as well as budgets.

When determining your maintenance regime, it is important that you do not neglect assets on the basis that they will soon be out of service. You may be reluctant to invest in equipment which is due to be decommissioned but as many assets are currently operating beyond their life expectancy, it is more important than ever to ensure that employees and contractors are not put at risk. Difficult business decisions may need to be made. You cannot overlook a risk simply because it will only prevail for a limited time. Sometimes, equipment fails and quick decisions must be taken about whether to repair it or replace it. There will be times when repairs or upgrades cannot be made and the equipment will need to be decommissioned. These decisions are often more difficult in a tough economic climate but proper information management and communication, as mentioned above, will help get it right.

Getting it right

The offshore industry is expending significant time, effort and money on managing its assets but organisations across all sectors can learn from their efforts. You should have in place procedures to identify your business’s needs and to manage them before unacceptable risks arise. Failure to actively manage your asset portfolio could end up costing your business greatly if you have to replace equipment rather than being able to repair it, or even worse, if you have to deal with the fallout from an accident caused by corrosion or mechanical failure. The costs of asset degradation or failure are not limited to repair or replacement but may also include management time, clean-up costs, legal fees, increased insurance premiums and potentially huge criminal fines.

In a tough economic environment reducing costs may be tempting but you cannot afford to compromise when it comes to health and safety.

We can advise you on your responsibilities and how to meet them in a cost efficient way. In the event of an incident, a documented management plan as well as procedures and assessments can be used as evidence in court to demonstrate you were actively managing your assets. For more information about how we can assist you with managing ageing assets within the offshore industry, or beyond, please contact one of our specialists below. 

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

Oil and Gas

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Claire Notley

Associate

I am an Associate specialising in regulatory law and enforcement.

Adam Nell

Director

I help clients with their international construction and engineering business so that they can deal with the legal side quickly. I also help clients with a wide variety of international commercial arbitration work.

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