The pipeline fires at the 270,000bpd Mina Abdullah refinery in June has once again brought the issue of health and safety and risk management for Kuwait’s NOCs to the fore.
Samuel Ciszuk, Middle East energy analyst at IHS Global Insight said that it was yet another reminder of Kuwait’s deep deficiencies when it came to health and safety (HSE) standards.
“Apart from Iraq and Iran, where violence and/or long periods of international sanctions have depleted the industry’s technical, operational, and HSE standards, Kuwait’s hydrocarbons industry seems to have the dubious distinction of seeing the most workers injured or killed in the entire Gulf region,” said Ciszuk following the incident.
But the message is not lost on everyone in the local industry according to Shehab Abdullah, Team Leader Risk Management at Kuwait Oil Company (KOC) who embarked on a three-year Enterprise Risk Management (ERM) implementation initiative together with Dent Norske Veritas (DNV) for the company.
“We take risk management very seriously,” says Shehab. “By practicing Enterprise Risk Management we adhere to our mother company, Kuwait Petroleum Cooperation (KPC) directives and also demonstrate sound governance to our stakeholders. Getting risk management wrong is not an option for us.”
As part of its commitment to develop a risk management framework, KOC hired DNV to help develop and implement its ERM system throughout the organisation.
Shehab said, “Risk is inherent in all KOC’s business activities and employees intuitively manage many risks on a daily basis. However, more formal, systematic and enterprising approaches to risk management have become an accepted component of best business practice, and are a requirement of our leadership. Consequently, we hired DNV to help us develop and implement our ERM system.”
KOC’s risks, according to Shehab, fall into several categories and include operational; financial; health, safety & environment; reputation, compliance & governance; and human resources.
“By capturing the risks and applying appropriate action to reduce the impact level that is acceptable to the business, we can have the confidence in our work processes. We shall also endeavour to share our learning based upon the methodology and risk databases we have created with the help of DNV.”
Speaking about the KOC project, DNV’s Abu Dhabi area manager, Prajeev Rasiah says that there are definitely efficiencies to be gained by having an enterprise view of risks rather than focusing on individual risk areas such as HSE, operational and business risks.
“An NOC, the mother company, which might be managing risks across its various entities and those risks might be similar, for example the tank operations and the oil and gas arm of an NOC might have similar risks but often they’re not managed the same way,” he says.
Project delays
On risks associated with project delivery however, Rasiah said that the region’s NOCs have a rather relaxed attitude:
“In discussions we’ve had with at least one of the major projects, I was quite surprised at the answer I got about project delays and essentially the feeling I got was that they passed that risk onto what they call the PMC (Project Management Contractor) which is unusual because ultimately you are the one who will lose money if the project doesn’t start up on time.”
He adds: “You can pass some of that on but the PMC would say that’s not in our contract or might limit their liability so I asked the question “what if your project is six months delayed, what does that mean to you?” and one of the VPs of an Adnoc company said ‘No that’s not my issue’.
Rasiah believes that these practices could be due to NOCs reliance on cross-subsidisation from other parts of the company as internal customers to act as a safety net.
“On the project risk front, it’s not as mature as I would have seen it in Europe or North America,” he said.
Top-down approach
Rasiah says that the key to implementing effective ERM systems and practices in the region is to adopt a top-down policy-making approach by those in authoritative positions.
“Unless there is a directive as there was in the case of KOC, I don’t think there will be a major push for each of these companies to have an integrated risk management framework. KPC sent a directive out to all the Kuwaiti companies saying that you will have an internationally-recognised framework for managing risks within your companies, so all the Kuwaiti companies then had to embark on this ERM activity and KOC engaged us to do this,” he says.
“The directive went out in mid 2005 and in early 2006 we started phase 1 of the project which was around having a policy, before you can embed a system you need to have policy and workshops to develop a framework on what are risks.”
Under the directive the workshops and system implementation happened in three phases. Phase 3 was completed in October 2009.
So several workshops with the different departments within KOC were held and then we went on to implementing the system by embedding it within the organisation, we did the work within three phases. Phase 3 was complete in October last year.
DNV’s association with KOC on ERM implementation continues with a series of training sessions and workshops aimed at enhancing the risk awareness among the KOC staff and capacity building for KOC’s risk management team.
