Westminster Hall
Tuesday 13 October 2009
[David Taylor in the Chair]
North Sea Oil and Gas Industry
Motion made, and Question proposed, That the sitting be now adjourned.-(Mr. Watts.)
9.30 am
Mr. Frank Doran (Aberdeen, North) (Lab): I am delighted to have secured a debate on a very important subject that we do not discuss often enough in this Chamber. The oil and gas industry is one of the most important industries in the country. It employs about 450,000 people across the UK, 198,000 of them in Scotland, and it is estimated that, last year, the Treasury collected about £13 billion of tax revenue from the industry. Because of the collapse in the oil price, that figure is likely to fall-it is estimated that the revenue will be about £7 billion, but that is still about 2 per cent. of UK tax revenue, so the industry is hugely important in terms of both employment and our economy. Of course, there is also the benefit of producing our own oil and gas. Although we are now at the stage where we have to import some of it-we are not self-sufficient-the industry remains immensely important.
By its very nature, the oil and gas industry is dangerous, and over its nearly 50-year history there have been many deaths and serious injuries. Memorial services have become almost a tradition in Aberdeen-one that we could do without. Just over a year ago, I was fortunate enough to lead a debate in this Chamber to commemorate the 20th anniversary of the Piper Alpha disaster-the world's worst offshore disaster, in which 167 men were killed. During that debate, the Minister's predecessor, my right hon. Friend the Member for Stirling (Mrs. McGuire), gave an assurance that there would be a review of an important report produced by the Health and Safety Executive offshore safety division on the integrity of oil and gas assets in the North sea.
That report set out some very disturbing findings. Known as the "Key Programme 3-Asset Integrity Programme" or KP3 report, it followed targeted inspections by health and safety inspectors of about 100 offshore installations-approximately 40 per cent. of the total. All types of facilities, including fixed, manned and normally unattended installations, floating production, storage and offloading vessels and mobile drilling rigs, were part of the survey. The inspections were structured to cover all aspects of maintenance management, including the safety critical elements and plant-including computer programs-whose purpose is to prevent, control or mitigate major accident hazards. The report focused primarily on the maintenance management-the management systems and the processes that should ensure that safety critical elements are available when required. The main areas where the report raised concerns included asset integrity/process safety management systems-I am sorry that this is so technical, but it will not last long-as well as the physical state of the plant offshore; matters of significant concern with major
hazard control measures; human resources and competence; leadership and management; and corporate and cross-industry co-operation and communication.
Some of the most worrying aspects of the report were the comments on management. For example, it found that there was poor understanding across the industry of the potential impact of degraded non-safety critical plant and utility systems on safety critical elements in the event of a major accident. According to the report, the role of asset integrity and the concept of barriers in major hazard risk control are not well understood. The report stated:
"Many senior managers are not making adequate use of integrity management data and are not giving ongoing maintenance sufficient priority."
"the decline in integrity performance that started following the low oil price has not been effectively addressed and there appears to be an acceptance of this knowing that the assets are likely to be sold."
Essentially, production facilities were being downgraded because they were expected to be sold on, so why spend the money? There were many other areas of concern, but I shall record one final one. The report stated that
"Declining standards in hardware"
"having an adverse impact on morale in the workforce."
When the then Under-Secretary announced the review of the KP3 report in the Piper Alpha debate last July, she made it clear that the review would include
"focusing on industry leadership to create a stronger safety culture in which the involvement of the work force, including the industry's trade unions, will be critical."-[Official Report, 2 July 2008; Vol. 478, c. 251WH.]
That review has been carried out over the past year and was finally published in July. It is important to note that the oil industry accepted the original report's findings and worked with the review team. Individual companies also worked hard to deal with many of the problems identified. It is therefore no surprise that the review, although not giving the industry a clean bill of health, recognised the progress that has been made. As a long-term observer of the oil and gas industry, I take the view that the KP3 process has been extremely useful.
Miss Anne Begg (Aberdeen, South) (Lab): Does my hon. Friend agree that, before the KP3 report was produced, the oil and gas industry tended to be reactive-it reacted when there was a disaster and put things in place afterward-but that the KP3 report succeeded in changing the emphasis to one of being proactive and encouraged the industry to identify risks and deal with them ahead of time, before they became something that might lead to a fatality?
Mr. Doran: I agree with my hon. Friend up to a point. I remember the same discussions following the Piper Alpha disaster, when the Cullen report was produced. That report encouraged the industry to be proactive. The evidence of the KP3 report is that we need an independent body such as the HSE to keep the industry on its toes. I would like to see a day when that is not necessary, but it is important to have that regulatory involvement.
Sir Robert Smith (West Aberdeenshire and Kincardine) (LD):
Following on from that point, the other very useful thing about KP3 was that it brought minds back
to asset integrity, because much of the safety effort had perhaps been diverted into the slightly easier area of improving the statistics on injuries and individual human safety methods. All of those are very important, but perhaps people's attention had come off the target of asset integrity and the structures that were being used.
Mr. Doran: Again, that is correct. From the point of view of the industry, the report was a difficult one for it to swallow, but at the same time it has been extremely useful in helping the industry to refocus. That is what we all want. We need improved safety and we cannot have that without a properly effective safety culture and responsible regulation.
The whole KP3 process has highlighted serious deficiencies in the way in which the oil industry was operating and has helped to put in place processes that should ensure increased awareness among the managers and work force-the very point that my two colleagues have just made-of the importance of management of safety systems, the integrity of plant, and communications across the industry and across individual companies.
Fundamental weaknesses remain in key areas, however. Most of those relate to the industry's culture, which is part of the history of the worldwide oil and gas industry. It is a difficult and dangerous industry that requires incredible skill and tenacity-not to forget shedloads of money-to achieve its objectives. A particular mindset is needed to be successful: quite a lot of the hunter-gatherer mentality goes into the search for oil. That mentality can produce positive results, as the success of the industry shows. The technical development of the UK offshore industry over the 40-plus years of its existence is nothing short of miraculous, and the impact is not restricted to the UK. The technologies developed in the harsh environment of the North sea, together with the skills of our work force, are exported to all parts of the globe, again to the benefit of the UK economy.
However, other aspects of the culture, particularly the territorial nature of oil companies, produce blind spots. Despite the KP3 process, a number of issues remain unresolved, one of the most important being hydrocarbon releases-unplanned releases of gas from offshore equipment. The Piper Alpha disaster was caused by a hydrocarbon release. Releases are categorised by the HSE as minor, significant or major. It is impossible to discuss hydrocarbon releases and the problems that they create without considering the offshore working systems, particularly the permit-to-work system. The KP3 report includes the annual statistics for significant and major releases since 1996-97. Releases in the significant and major categories have declined: major releases have plateaued at about four or five a year, although there were none in 2008-09, and significant releases plateaued at about 60 to 70 a year between 2005 and 2008. The hydrocarbon release that led to the Piper Alpha disaster was in the significant category, and we allow 60 or more such releases to occur every year.
Hydrocarbon releases are a major concern to everyone in the industry, but attempts to deal with them across the industry have had only limited success. Companies are totally wedded to their own systems. At the same time, more and more offshore work is being done by
contracted labour, which has to become familiar with myriad different systems. On some platforms, operating companies have different systems from their contractors.
The trade union view is that the problems are created by lack of investment. The trade unions also question the way in which offshore operators investigate incidents, and particularly the failure on some platforms fully to involve the offshore safety committee. What is clear is that there is no common cause behind the high number of hydrocarbon releases. In most incidents, however, none of the events is unforeseeable. We know that we cannot afford to make mistakes, but the evidence in the statistics and the consequences is that we continue to do so.
Malcolm Bruce (Gordon) (LD): The hon. Gentleman is making an important point about the industry's collective wisdom and knowledge. Does he share my concern that the number of people with the experience to know where the safety risks are is declining because we have an ageing work force, which might lead to an increase in risk?
Mr. Doran: The KP3 report focuses on that issue, particularly in management where there is a turnover of staff. Given the nature and background of some of the oil companies, people often come into the UK from other countries to manage facilities. The right hon. Gentleman makes an important point.
We cannot afford to make mistakes. When we do, however, it is not for lack of tools, procedures or safety warnings and systems. Far too many people go to work on the wrong piece of equipment or take out the wrong part; there are recurrent near misses. Speaking to me recently, one industry representative likened offshore systems to a surgeon removing the wrong kidney-these things are that important. The Cullen report into the causes of the Piper Alpha disaster noted that a flange on a compressor was not replaced properly and that led to the gas release. We can see from the statistics that such things happen consistently.
Bob Spink (Castle Point) (Ind): Is the hon. Gentleman aware that a shut-off valve at the Calor Gas site on Canvey Island failed to operate properly, resulting in the release of 163 tonnes of liquefied petroleum gas into a densely populated residential area? A lot of the gas was released as an unconfined vapour cloud, which could have been catastrophic and could have made Buncefield look like bonfire. Does the hon. Gentleman share my concern that, a year on from that incident, Calor Gas has still not made itself available for interview under caution by the HSE, which is therefore still unable to report and to introduce the right safety measures to ensure that such things do not happen again?
Mr. Doran: I know only what I have read in the press about that release, but the hon. Gentleman is right. The problems are not confined to the offshore oil and gas industry. The incident that he mentioned occurred onshore, where the same safety systems need to be in place. I will come to that a little later. Regulation and compliance with the regulatory system are crucial. In that respect, I totally agree with him.
We all know that there is a problem-the proof is in the statistics-but what is missing is a sense of common purpose in dealing with it. Individual incidents are investigated and reported on, but no common approach
or strategy emerges from such work. The reality is that there are far too many vested interests-mainly oil companies insisting on keeping their own procedures. Often, head office says that everyone must operate a system because it is the company system and part of the company's identity.
We need a new approach by the industry. We need a completely different system and way of working, rather than a new computer system or any other whizz-bang technology. There needs to be a commitment from the whole industry to move to a new standard, along the same path and away from a single-company approach. Individual companies have erected a wall around their current practices. By refusing to be open and to recognise the risks and problems in the current arrangements, they are missing an opportunity to move the whole industry forward and to improve safety throughout the North sea.
A first step would be a proper analysis of the cost of the present system to the industry and individual companies, including the risks and consequences of the failure inherent in that system. That should be set against a more coherent process-one that is common across the North sea, but which would, of course, need to allow for a certain amount of individuality, because no two platforms are the same.
Sir Robert Smith: The hon. Gentleman raises an important point when he says that we should have common practices throughout the North sea, but he probably meant the UK sector of the North sea. Life for those working in the North sea would be greatly improved if more could be done to drive through a treaty with Norway to ensure that standards operate across boundaries. When equipment moves from one side of the North sea to the other, a whole different safety regime and culture applies, even within that one area.
Mr. Doran: I am an internationalist, and I can but hope, but the hon. Gentleman is right. One problem is that UK workers often move to Norway and vice versa. They also move to the Dutch, Danish and German sectors. We need to get the arrangements as close as we can, but of course I understand the different international aspects.
We also need a tougher approach from the HSE's offshore safety division. I know from my conversations with inspectors that they would like to see improvements, and the KP3 report and the review give them the platform to move things forward.
One example that those on my side of the argument often throw at the industry, to pick up the hon. Gentleman's point, is that companies in Norway do things better. What usually comes back at me from UK oil industry representatives is, "Yes, they have a common permit-to-work system in Norway, but it's very similar to ours. In reality, our system is about 80 per cent. common content, and that's where the Norwegians are." That is what I am told, but I do not know whether it is accurate. Indeed, I do not think that anyone knows. As far as I am aware, no one has studied and compared the UK and Norwegian systems to see which is more efficient in terms of the cost and other aspects, safety being the priority. By the way, all the companies that fight off a common system in the UK sector happily work with one in Norway.
If we are serious about safety in the North sea, we have to tackle the problem of hydrocarbon releases, and the only way to do that is to examine a common permit-to-work system. When the Minister replies, I would be grateful if he addressed that issue and, in particular, fired the starting gun by asking the HSE to carry out a comparative study of the UK and Norwegian systems as they relate to the permit-to-work system, with a view to introducing a common permit system in the UK.
Another important issue-a poor aspect of the culture in the North sea industry-is the "not required back" system. The offshore installation manager on any offshore platform had the ability to sack someone on the spot, regardless of whether that person was employed by the company-the word "sack" is a bit strong, but people could be removed from the platform. I am delighted that the industry and the unions have reached an agreement on the issue, and I hope that that is one skeleton that will be well and truly buried. However, I am hearing disturbing reports from trade union officials about an increase in dismissals for minor breaches of health and safety requirements. I hope that the industry is not replacing one obnoxious working practice with another. The HSE needs to keep an eye on the matter, and the unions are gathering data and examples.
I want to move off the strictly offshore aspect and the production side of things, although I have spoken to the Minister's officials, and he will expect me to say something about safety committees and safety representatives offshore. We need to change the system in that respect. There are strong aspects to the offshore system, which varies significantly from the onshore system. The most attractive part is the election of representatives, but the statutory exclusion of trade unions is a defect. We need a much more independent element, and I will address that issue on another occasion.
In this year, of all years, it is difficult to talk about safety in the North sea without mentioning the two helicopter crashes that have happened. I warned the Minister's officials that I would raise the issue, and I know that it is not his departmental responsibility, but I should appreciate it if he would pass on my comments to his colleague in the Department for Transport.
If working on an offshore installation in the oil and gas industry is dangerous, so is getting to and from works. I have some figures that were compiled for me by Mr. Jim Ferguson, a journalist who works exclusively on aircraft-particularly helicopters. He has been monitoring the use of helicopters for more than 30 years, and the figures that he gave me are shocking. I am well aware from my own experience of the number of helicopter incidents that have happened, but looking again at the number of deaths I find that 98 passengers and 13 crew members have been killed in helicopter disasters on UK sector passenger flights since 1976. If search and rescue and training flights are added to that, it gives another 10 crew and four passengers. Thus the UK total of deaths in the North sea from helicopter crashes alone-and those do not figure in the offshore safety figures, because, of course, they are the responsibility of the Civil Aviation Authority, and not the HSE-is 23 crew and 102 passengers. According to Mr. Ferguson's figures, in the whole of the north-west European continental shelf, 151 individuals and 40 crew have been killed in helicopter crashes. Those are shocking figures.
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