Lloyd’s Register says to SPE Offshore Europe oil and gas companies you don’t have to be out of pocket to be compliant

Concentrate on what counts! The offshore sector can save costs without compromises.

07 September, 2017

In high-risk sectors, challenging compliance is often regarded as controversial and even underhand. It should be applauded if done right; taking full advantage of every opportunity to optimise efficiencies is a positive step.

Lloyd’s Register’s (LR) argument for cost-conscious compliance does not advocate compromising safety, environmental protection or corporate reputations. It does not dismantle the regulatory framework. Rather, it reconstructs those beams and brackets to build a robustly effective compliance approach for unique offshore assets, be they fixed or floating.

Concentrating on what counts
The supply chain focus on reducing compliance spending is direct, but misdirected. Miniscule, short-term savings are the result. Take an asset, which might incur a £200,000 GBP spend with a classification society and Independent Verification Body (IVB). Even a reduction in rates as high as 20% merely equates to a one-off saving of £40,000. This is insignificant when you consider that a single tank entry will cost roughly ten-fold that amount. On top of this, there are the financial losses of interrupting production; the collateral costs for one event can escalate into the millions.

It is this short-term mindset that needs to shift, not the tank’s ballast. And it’s not just tank entries to consider. Compliances’ collateral costs encompass a spectrum of activities that shut down critical equipment, prevent everyday operations, consume the time of on-board personnel, introduce external inspectors and other professionals, use up helipad slots and more. The majority of these costs can be saved if you start from the position that there is little need for compliance-only activities.

We see six main ways to optimise compliance

  1. Fully integrate compliance and integrity assurance activities   
    ‘Double dipping’ of activities is commonplace, but with one unified programme this costly practice can be avoided. The long-term benefits are considerable for an upfront investment. Working closely with a Classification society and experienced IVB such as LR, an offshore business can account for all of its asset’s collateral compliance costs.
  2. Manage activities on a true risk-based basis
    A risk-based approach provides particular opportunities for savings, especially for complex assets operating in challenging environments. It allows considerable flexibility in the scheduling of structural inspections, moving away from the traditional five-year survey cycle. Credit can be earned for enhanced design that reduces fatigue and corrosion. Activities can be coordinated with operational or maintenance needs. LR updated its ‘Rules and Regulations for the Classification of Offshore Units’ to allow the use of risk-based inspections techniques for a big-ticket item: hull structural inspection.
  3. Work with regulators to agree alternative arrangements
    The opportunities here have largely been untapped, even when it comes to floating installations. The trend is to adhere to international conventions, such as MARPOL and SOLAS, without contemplating the options. But rules are there to be challenged with sound alternatives that Class can agree. ‘Equivalent level of safety’ clauses appear for a reason. Solutions such as condition-based maintenance are well defined and accepted. Successes can be achieved, provided the case is made from an in-depth understanding of what’s being challenged.
  4. Plan for compliance activities, particularly offshore
    Where compliance-only activities can’t be avoided, planning them in saves money. Aborted surveyor visits are costly. Dealing with an issue offshore that could have been resolved onshore is an unnecessary expense. These all add up. Again, a close relationship with a classification society and IVB will help here.  
  5. Take advantage of credit to be gained from unplanned events, maintenance and testing
    Compliance does not necessarily require an activity to be witnessed by an independent body. An audit of the activity by that body may be perfectly acceptable, as long as the details have been suitably recorded. With a little forward thinking, unplanned downtime becomes an opportunity to perform upcoming compliance tasks, not just to investigate the incident. Why run a shutdown test in the near future when equipment has already been forced to power down?
  6. Be open to using new tools and techniques
    We’re able to help industry assess the pros and cons of employing new ways to demonstrate compliance. Let’s return to that cargo tank. Inside an LNG vessel, the membrane will be a big, wide, flat space and, with only a few welded stiffeners. Such an environment lends itself well to inspection by drones. The increasing use of photogrammetric techniques and supporting software allow us to see and analyse more than a surveyor. Risk modelling and graphical representations can also support efficiencies.

With a compliance rethink and closer collaboration between the offshore industry and its independent experts, money spent on meeting regulations should never be a waste of money.

Jason Knights

Head of External Communications and Media Relations, Energy

Oil and gas, nuclear and renewable energy

London, United Kingdom