2015 is a year with a multitude of anniversaries including the 50th anniversary of Churchill’s death, the 800th anniversary of the Magna Carta, with Waterloo, Agincourt and various World War one events to come.
We will also have the 50th anniversary of the discovery of the first significant hydrocarbons in the North Sea, in what is now the West Sole field. This is a significant milestone for the industry and we should celebrate the growth of the UK oil and gas industry.
But while we celebrate its progress, there is a darker event to remember. 2015 is also the 50th anniversary of the first offshore tragedy with multiple deaths. While celebrating the beginnings, we should also remember the cost of that exploitation. Since 1965, there have been 334 deaths offshore and another 115 in helicopter incidents.
The Sea Gem oil rig, a barge converted for use as a drilling rig and operated by BP, drilled the well, which located that first gas. On 27th December 1965, the rig capsized off the coast of Lincolnshire, killing thirteen of the thirty-two crew members. There were no safety regulations at the time, only a code of recommendations produced by the Institute of Petroleum.
The public inquiry (also a first for the industry) which followed criticised the code and made recommendations to improve safety. These were based on regulations used to control onshore workplaces and mines. The legislation gave us the OIM and the standby safety vessel, but no one recognised the need for the industry, operating in the harshest and most difficult of environments, to have its own bespoke regulatory requirements.
In the mid-eighties, Aberdeen, experienced its first global oil price collapse, very similar to the one we are going through at the moment. The industry response was to introduce massive cost cutting in every area including the routine maintenance of platforms and facilities.
On 6 July 1988, a series of explosions destroyed the Piper Alpha and killed 167 men. The worst oil and gas incident anywhere in the world. Lord Cullen’s public inquiry followed. The Cullen report spelled out clearly the failings of the operator in its health and safety system.
No one has ever questioned the thoroughness of the inquiry and the importance of Lord Cullen’s report. It changed the safety culture, not only in the North Sea, but in the oil and gas industry around the world. Among the 106 recommendations, was the transfer of responsibility for health and safety away from the Energy Department to the Health and Safety Executive.
Since Piper Alpha, there has been a real improvement in safety offshore. Injury and death rates have fallen and the industry continues to invest significant sums of money and other resources in safety. However, the lessons of the past are that we can never become complacent.
From time to time, there have been signs of slippage. In 2003, two workers were killed in a gas leak on the Brent Bravo platform, the first “process” deaths since Piper Alpha.
Following these deaths, The HSE carried out an asset integrity programme involving targeted inspections of around 100 installations. The Key Performance (KP3) report, had some worrying things to tell us about the lack of maintenance of platforms, particularly when they were affected by commercial considerations, and on work force morale.
The KP3 report has forced offshore operators to be more vigilant Lord Cullen’s decision to transfer safety to the HSE has been fully vindicated. The industry needs a proactive regulator and one where there is no conflict of interests.
Despite that, there are still serious incidents. For example, the 2012 “gas leak” on the Elgin platform which later became described by the HSE as a “blowout” which “had the potential for a major fire and explosion resulting in serious injury or loss of life”.
Thankfully, in this case, the emergency procedures were put into place and personnel were evacuated safely. The platform was built with post-Piper design features and the coordinated response of the offshore and onshore emergency response teams was exemplary. The Elgin incident shows how far we have travelled since Piper Alpha, but also highlights that the risks remain.
Risks are at their highest when the industry is under pressure. We are now going through a very difficult economic period which will have a serious impact on everyone who has involved. The pressures are considerable.
There have been at least three serious downturns in oil price in the life of the UK oil and gas industry. The worst and most damaging was the downturn in the mid-1980s. An estimated 20,000 jobs were lost in Scotland, most of them in Aberdeen and the North East. 50,000 jobs were lost over the whole UK. The fact that the job losses were higher in the rest of the UK than in Scotland reflects the fact that while the industry is centred in Aberdeen, the supply chain and the workforce is spread throughout the UK.
There is a risk that this year’s downturn could be on the same level of seriousness as the 1980’s events. But the industry has changed substantially and the profile is now quite different from the early days. The North Sea is now a mature province with a different company demographic, attitudes and regulation. With the right focussed support from government and the industry it is possible that this very difficult time will not develop into the tragedies we saw in the 1980s.
Significant numbers of redundancies have already take place with more to come. Most of these have been onshore jobs. Offshore unions and management are negotiating staffing levels, longer offshore cycles and pay cuts.
Since the collapse in the oil price, industry representatives and others have insisted there need to be a tax cut. Oil companies are still angry about the increase in the supplementary charge which was made in 2011 budget and they would like to see it removed completely. The Chancellor has met them a small part of the way by introducing tax reliefs for brown field sites, for high temperature and high pressure fields, and reducing the supplementary tax by 2%.
The Chancellor also announced last year that the offshore tax regime would be reviewed. The review was started before the fall in prices and, to a certain extent, has been overtaken by the price collapse.
The final budget of this Parliament is just a few days away and tax reliefs for the industry are likely to be very high up the agenda. It seems fairly certain that we will see a new investment allowance. This will replace the collection of reliefs which make the tax regime so complex. The issue for the industry will be the level at which the reliefs are set.
There is also a strong possibility of a new scheme to encourage exploration and appraisal in areas which it is thought that there are exploitable reserves of hydrocarbons, but which have not yet been properly explored. This would involve some government funding.
The focus of the budget will be to support the industry through difficult times. It is unlikely to figure in the budget speech, but health and safety must remain a priority. The Government must ensure that regulators are able, through powers and resources, to be proactive in ensuring that despite the economic situation, safety levels remain at the highest level. A specific targeted relief should be considered by the Government to support continuing maintenance of infrastructure and improvement of health and safety systems and equipment. The consequences of the 1980’s downturn was not just job losses. All projects which were in progress were stopped. The platforms which were producing oil and gas carried on producing, but many costs were cut to the bone. In particular areas vital to safety, such as fire safety equipment, deluge systems and others received little or no maintenance.
The possible outcomes from this approach were not immediately apparent, but, on the night of 6th July 1988, when the Piper Alpha was destroyed, they were there for the whole world to see. If there is slippage in maintenance through this downturn, the dangers for offshore workers will be significantly increased, not immediately, but at some time in the future.
The lessons from the Sea Gem, Piper Alpha and Elgin show that we need to be ever vigilant and aware of the serious consequences of poor health and safety. Disasters not only kill but they are extremely expensive in every other respect for all of those involved.
Everyone, industry and Government – UK and Scottish – needs to be focused on maintaining employment, jobs and skills. The economic climate will change and it is important that the oil and gas industry is capable of getting into gear as quickly and safely as possible when that happens.
Frank Doran is Labour MP for Aberdeen North. He has been heavily involved in offshore safety for many years.