What To Know
- And in 2020, much of the demand for oil and gas had fallen drastically due to global lockdowns and “work from home (WFH)”, further exacerbating business disruption for the oil and gas industry in revenue.
- In a bid to counter the rising cyber incidents, countries have been taking preventive measures such as establishing privacy laws, such as the GDPR in Europe, the PIPA in South Korea, and PDPA in Singapore.
Editor’s brief: Even as the pandemic rages on worldwide with the onset of vaccinations, the reality is that the world needs to go on, albeit with more caution. The oil and gas industry continues to power much of the world, including the likes of EVs. What are some of the critical factors that can cause hazards in the oil and gas industry? What are some possible way to mitigate such risks and hazards? Leading German industrial safety stalwart HIMA speaks on the topic. Read more below from the vendor’s op-ed.
Protecting against the major hazards in the Oil and Gas industry
by Friedhelm Best, Vice President Asia Pacific, HIMA
Every business across the globe confronts risks, some of which may be colossal or deadly. Natural disasters and the raging pandemic account for a large number of losses, and cyberattacks continue to threaten the safety of companies as well.
Allianz Global Corporate & Speciality (AGCS) has released its “Allianz Risk Barometer Report” for 2021, the 10th year running. The data is taken from more than 2,700 risk management experts from over 92 countries across 22 industrial sectors. The annual survey examines the top 10 risks for companies across the globe, based on individual countries, regions, and specific industries, such as agriculture, manufacturing, mining, shipping, and oil and gas.Β
What’s the situation in the oil and gas industry? Today, we explore some of the major risks to the oil and gas industry and explore what plant operators can do to protect against them.
1. Business Interruption
According to the report, the top risk is still business disruption (it was also the top risk in the past few years in this report). With the fallout from the pandemic, industries and companies large and small have been gravely disrupted in business operations and their supply chain integrity.Β
Regardless if the cause of risk traces back to a fire incident or a cyber attack, the repercussions for a company are often underestimated. On average, monetary losses as a consequence of business disruptions can amount to more than US$2 million. In many cases, it is difficult to even accurately calculate the financial impact or identify the cause of such a disruption. And in 2020, much of the demand for oil and gas had fallen drastically due to global lockdowns and “work from home (WFH)”, further exacerbating business disruption for the oil and gas industry in revenue.Β
2. Pandemic outbreak
2020 became a radical year of change, for good and bad. Many lives and livelihoods were lost in the year, just as businesses folded or shrank. However, just as many businesses pivoted to new ways of doing business, with the creation of new jobs and new learning. According to the report, the pandemic as a risk factor rose to number 2, contrasting with previous years (it was ranking 16th in 2019).Β
Entire industries, such as aviation, hospitality, leisure, and even food and beverage, essentially collapsed to near zero or zero. For oil and gas industries, the fallout from the pandemic was demand, which aviation and shipping industries, forming the bulk of demand, shrank drastically. With governmental support and rescue measures being slowly phased out in 2021, insolvencies of businesses will rise significantly. Because of telecommuting and working from home, even oil and gas industries saw the need to digitalize, empowering workers to work remotely, and adopt digital management and control technologies.Β
3. Cyber Incidents
The frequency of cyber incidents have been soaring, especially because of the pandemic, and news of breaches and data leaks are seen every other day. In the connected world we live in, everything relies on networking – and that includes the process industry. However, this makes systems vulnerable.
Regardless if it’s cyber crime, IT failure, power outage or a data breach, these incidents can lead to severe business disruptions, resulting in a loss of business, and inflict considerable damage to a company’s reputation. In the report, the total cost of ransomware demands in 2019 was already US$25 billion.
In a bid to counter the rising cyber incidents, countries have been taking preventive measures such as establishing privacy laws, such as the GDPR in Europe, the PIPA in South Korea, and PDPA in Singapore.
Cyber attacks can lead to severe business disruptions, loss of customers, and damage to a companyβs reputation. Statistically, every company in this survey has already been affected by cyber threats or expects to be in the future. Cybersecurity has consequently become an essential part of industrial safety.Β
The international standard IEC 62443 requires separate network levels with defined transitions so that operators are able to protect all key areas: hardware, the operating system, the network, and engineering.
4. Natural Catastrophes
While natural disasters are inevitable, they may trigger considerable social and economic impact, including business disruption.
Back in 2017, a whopping US$135 billion went to insured losses. The devastating consequence of the 3 hurricanes Harvey, Irma, and Maria served as a wake-up call for plant operators and got them asking, “Is damage caused by extreme weather something we have to get used to?β
5. Fire and explosions
The effects of this risk can be devastating and can include the loss of lives, property damages, environmental pollution, and in some cases, a shutdown in the business altogether.Β
Systems that control, regulate, and protect burners can prevent such severe consequences, and minimise their loss in an unfortunate fire or explosion event. Emergency shutdown systems also prevent hazards, ensuring safe operations. This is necessary as the process industry has several critical triggers for fires. Depending on the system, extremely high pressures can build up in closed pipes or tanks. Some tank and pipe systems might be unable to withstand beyond a certain level of pressure threshold. This can result in considerable operational damage. In addition, it also poses serious health hazards to employees.Β
For fire and explosion emergencies, fire and gas systems should be set in place to detect dangerous situations from an early stage. With such a system in place, employees are accorded time to take crucial measures, such as evacuating the plant in the event of a dangerous situation.
6. Environment risks
In the production and processing of oil and gas, even the smallest technical malfunction can lead to serious consequences. Such malfunctions can impact people, machines, and the environment directly. A single leak in a pipeline is enough to release pollutants – like methane gas.Β
Systems made for early leak detection can ensure the longevity of a company. Detecting leaks enables operators to not only prevent devastating damage, but also avoid irreparable consequences for their image and reputation.
Identify Risks and Reduce the Threat They Pose
The oil and gas industry is one of the most demanding sectors in the world. It is crucial for operators to take risk-reduction measures after identifying the existing risks involved.Β
SIS safety control and related functional safety life-cycle methods do not only ensure safe production. Business disruption insurance and certification organizations also play a part in ensuring appropriate emergency and preventative measures are taken. Only then is a company insured against unforeseen incidents.
However, this often presents operators with a costly and time-consuming challenge. It is mandatory to have a specially trained personnel to operate the safety solution and ensure that the technology always work reliably. But this requirement means that some employees may need to be deployed fro safety operations, and distract them from their core duties, which is primarily efficient production.
One possible solution would be to hand over support for the entire system to experts. These specialists service safety systems over their complete life-cycle, perform regular maintenance, and replace consumable parts. Holistic solutions enable companies to reduce life-cycle costs, prevent disruptions, and reduce unplanned downtime β minimizing the majority of risks that are of the highest concern.
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Korean translated version:
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